Pensions - Articles - Aegon calls for cautious ‘test and learn’ on Lifetime ISA

 • It will take time to assess if the new Lifetime ISA will be truly used as a retirement savings vehicle or simply as a house deposit savings plan

 • The risks of extending Lifetime ISA to the more radical Pensions ISA must not be forgotten

  

 Aegon believes the Lifetime ISA could appeal to certain groups but warns it could encourage employees to opt out of valuable workplace pensions and might in time prove to have been used primarily for house deposits, leaving individuals even further behind in readying themselves for retirement.

  

 Steven Cameron, Pensions Director at Aegon says: “The Lifetime ISA may prove attractive as a retirement savings vehicle for certain groups most notably the self employed. However, employees who are now entitled to an employer pension contribution to their workplace pension could be seriously lose out in retirement if they sacrificing this in turn for saving in a LISA. It’s vital that the LISA is promoted responsibly, highlighting that the same savings can’t be used twice to pay for both a house deposit and a retirement income.”

  

 Commenting on the Centre for Policy Studies recommendations to extend the LISA concept further to the workplace:

 “In the months before the Budget, the concept of replacing the existing system of pensions tax relief with an ISA style approach was widely debated and almost universally rejected as damaging to peoples retirement prospects. The so-called pension ISA would add unwelcome complexity for all existing savers, undermine auto enrolment, introduce inevitable political risk of savings being taxed again when taken and create macro-economic issues for future generations as the growing number of pensioners would increasingly be paying no tax whatsoever. Proposals to extend the Lifetime ISA to workplace looks very much like the pension ISA, creating these same issues and need to be considered with extreme caution.”