Lifetime ISA needs more investment flexibility to suit undecided savers
The Lifetime ISA is designed to allow individuals to save for either retirement or for a deposit on a first home. However, saving for a deposit and saving for retirement are very different and require careful consideration of investment strategy.
Typically, those saving long term look for investments with real growth potential whereas the shorter-term time horizon of saving for a deposit involves safer and less volatile assets. With such wildly different approaches, designing investment solutions which work for those who’ve not yet decided on their primary purpose is difficult. Aegon believes that offering investment solutions with a degree of guarantee is the most favourable approach and is calling on the Treasury to leave this option open.
Steven Cameron, Pensions Director at Aegon says: “Designing appropriate investment solutions for LISA is fraught with difficulties. The Chancellor has suggested individuals can use their LISA to save for both retirement and a first house deposit. But the same pot of money can’t finance both and those who are aiming to leave their options open will face real challenges in trying to choose an appropriate fund. Investing in equities for a mortgage deposit creates volatility risks while saving long term in cash for retirement is equally inappropriate.
“For undecided savers, a solution allowing some equity investment coupled with some form of guarantee could be the answer. If further down the line the decision is taken that the funds are for retirement, they can always revisit their fund choice accordingly.
“We’re keen that the Treasury allows for this form of innovation as it finalises the detail of the Lifetime ISA design.”
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