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Lifetime ISA 'not a threat'

07 July 2016

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The introduction of the new Lifetime ISA, or LISA, in 2017 could encourage people to save, according to financial education specialist, Wealth at Work.

Jonathan Watts-Lay, director of Wealth at Work – which provides financial education in the workplace, said LISA should not be viewed as a threat to pension funds.

He said: "LISA is a great option for people who want to save for a deposit on their first home, due to the guaranteed bonus, but it might also encourage people to develop a savings habit, which could ultimately benefit pension savings."

LISA was announced in this year's Budget and will be available from April 2017 for individuals under the age of 40.

Its introduction raises questions about the future of pensions and long term saving, particularly the introduction of a Pension ISA in the workplace.

A Wealth at Work poll found 68% of employers thought LISA was the start of the drift from pensions to ISAs in the workplace, but Watts-Lay says employers shouldn't necessarily be concerned.

He said: "Pensions should remain an integral part of saving, but other choices should not be seen as a threat."

"Workplaces already support employees with various savings vehicles to help them with their short, medium, and long-term savings goals, including workplace ISAs, share schemes and pensions."

"This variety allows employees to choose a savings method or a combination of methods which are the most appropriate for them at a given point in time – so I see no reason the LISA wouldn't be a great addition."

Adding that employers need to consider how they can support individuals within their workforce who want to save in different ways with options such as a percentage of salary used to "buy" benefits, there are alternative funding options for the LISA in future.

"Whether employees decide the LISA or another savings method is right for them, the need for financial education, guidance and advice has never been more apparent," said Watts-Lay.

First published 07.07.2016

Lindsay.sharman@wilmingtonplc.com