A third of people aged between 18 and 39 plan to save in both a workplace pension and a Lifetime ISA

Almost a third of people aged between 18 and 39 plan to save in both a workplace pension and a Lifetime ISA when the Lifetime ISA launches next year, according the research from workplace pension provider Now: Pensions.

The research found that 30% of people surveyed said they plan to save in both a workplace pension and Lifetime ISA, with 16% saying they will continue to save in a workplace pension and not open a Lifetime ISA.

Just 9% said they will stop saving into a workplace pension and put their savings into a Lifetime ISA, 11% don't intend to save into either and 19% don't know.

Of those planning to open a Lifetime ISA, more than a third (38%) plan to use the money saved for their retirement, one in five (21%) plan to use it for buying their first home while 18% say they'll use it for both.

Morten Nilsson, CEO of Now: Pensions said young savers shouldn't reject workplace pensions hastily.

He said: "For young savers, the Lifetime ISA is going to be very tempting, it can be used to buy a first house and that comes ahead of retirement, and this might lead to an increase in auto-enrolment opt outs.

"But savers shouldn't be too hasty to turn their backs on workplace pensions, over a lifetime of savings, a workplace pension offers better value largely as a result of the employer contribution."

He went on to say that a saver who puts GBP 20 a month into a workplace pension versus GBP 20 into a Lifetime ISA would have around GBP 300 more at the end one year.

The survey showed that for those planning to continue saving into a workplace pension, the biggest incentive is the employer contribution with 62% stating that they wouldn't want to miss out.

More than a quarter (27%) said they prefer having their money locked away until retirement without the option to access it early, and one in 10 believes it's more tax efficient.

"With pension saving, savers benefit from tax relief up front, receive 25% of their pension pot tax free and then only pay tax in retirement if they have an income high enough to be taxable," said Nilsson.

"For some, this will be preferable to paying tax up front with an uncertain promise of not paying tax on withdrawal.

First published 01.04.2016

Lindsay.sharman@wilmingtonplc.com