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Lifetime ISA popular with under 40s

27 October 2016

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Two-thirds of workers under 40 would open a Lifetime ISA (LISA), according to new research from Hymans Robertson.

The LISA, due to launch in April 2017, is an account that enables savers aged between 18 and 40 to receive a government bonus of 25%.

The research found 61% of workers under 40 would open a LISA, and of those, 23% plan to do so straight away.

The LISA is even more popular with Londoners, with 72% saying they would open a LISA – 37% of those saying they would do so straight away.

Paul Waters, partner at Hymans Robertson, said the figures demonstrate a financial reality for younger people.

He said: "A 25% bonus on savings towards a first home will be an irresistible and much appreciated leg up on to the property ladder for many."

"The fact that LISA's have even greater appeal among London's young workers undoubtedly reflects the difficulties faced getting a foot on that first rung in the capital."

The appeal of the LISA is the government bonus, according to 57% of respondents, followed by the flexibility of being able to use savings towards a first home (36%).

Of those who said they would consider opening a LISA, 68% said they would save alongside a pension, with 49% saving more to a pension and 19% more to a LISA.

Waters emphasised the importance of recognising that LISA investment won't be at the expense of pension saving.

He said: "We need to move away from looking at pensions and LISAs as competing products – one should not be at the expense of the other."

"Younger workers don't see them as an either/or decisions, they see them as a product that could boost their savings."

"Anything that gets younger people into the savings habit should be viewed as a positive," he added.

Of the respondents who said they wouldn't consider opening a LISA, 41% said the early exit penalty would stop them, while 34% said they preferred to save through a pension to take advantage of employer contributions.

First published 27.10.2016