Budget 2016: Lifetime ISA does not signify death of pensions - Fidelity International
Commenting on the Chancellor’s announcement of a Lifetime ISA, Richard Parkin, Head of Head of Pensions at Fidelity International highlights that it will help younger savers and the change should not be viewed as the “death of pensions”.
“We welcome any changes that encourages and incentives saving for the longer term – particularly those in the younger age group who are facing real struggles between saving for a pension and saving to get on the property ladder. The Lifetime ISA straddles that idea well and with flexibility on access, it will increase the appeal of longer term saving to younger generations.
“Talk of these changes signifying the death of pensions is overdone. For most people, they would still be best advised to use auto-enrolment and benefit from the matching employer contribution. These changes will be good for people who are lucky to have additional funds that they wish to save outside of auto-enrolment or who want to have a boost to their housing fund.”
In response to George Osborne’s introduction of a new Lifetime ISA, Phil Wadsworth, Chief Actuary, JLT Employee Benefits, comments:
“Are new attractive ISAs set to take over pensions?
“Getting one pound for every four is a straightforward incentive to save. Coincidentally, it is the equivalent of pension tax relief for a basic rate tax payer. The fact that Lifetime ISAs are much more flexible means younger people will likely find it more attractive than pension savings.”
“After all the debate about TEE or EET, with the Lifetime ISA, have we ended up with EEE?”
Could the New Lifetime ISA announced in Budget 2016 be a competitor for pension saving in the future?
Commenting on the announcement, Senior Consultant at Barnett Waddingham Malcolm McLean said:
"This is an interesting idea and an invovation on the current ISA arrangements. In so far as it is designed to encourage younger people to save, we are broadly encouraged and support the plans which come into effect from April 2017.
"My only reservation is that the law of unintended consequences might occur here. According to recent Office of National Statistics (ONS) figures, young people by and large are not opting out when automatically enrolled into a workplace pension and hopefully this will not encourage more of them to do so. In a sense, given that people only have so much money they can dedicate to saving, the Lifetime ISA could be seen as a competitor to conventional pension saving, and whereas the increased flexibility it offers is welcome, the full consequences and effects have yet to be established.
"The Lifetime ISA appears to have echoes of George Osbourne's alleged original plan to introduce the Pensions ISA which in my view would have had injurious effects for the pensions system as a whole. As this new arrangement sits on top of and doesn't fully replace the current pension system, those dangers are to some extent ameliorated but as indicated the long term consequences have yet to be determined. The success or otherwise of the package as a whole will only become clear over time."
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