Pensions - Articles - Majority of lifetime ISA savers to use money for retirement


New research* from workplace pension provider NOW: Pensions reveals nearly a third (30%) of people aged between 18 and 39 plan to save in both a workplace pension and Lifetime ISA when the Lifetime ISA launches next year.

 The research found that: 
 • 30% say they plan to save both in a workplace pension and Lifetime ISA
 • 16% say they will continue to save into a workplace pension and not open a Lifetime ISA
 • 9% will stop saving into a workplace pension and put their savings into a Lifetime ISA
 • 11% don’t intend to save into either
 • 19% don’t know
  
 Of those that plan to open a Lifetime ISA, over a third (38%) plan to use the money saved for their retirement, one in five (21%) plan to use it for buying their first home while 18% say they’ll use if for both.
  
 Morten Nilsson, CEO of NOW: Pensions said: “For young savers, the Lifetime ISA is going to be very tempting. It can be used to buy a first house, and that comes ahead of retirement sequentially and we know that behaviourally people place a higher value on nearer term events. This might result in an increase in auto enrolment opt outs.
  
 “But, savers shouldn’t be too hasty to turn their backs on workplace pensions. Over a lifetime of saving, a workplace pension offers better value largely as a result of the employer contribution. If a saver put £20 a month into a workplace pension versus £20 a month into a Lifetime ISA, by the end of the year they would have around £600** in their pension versus £300 in the Lifetime ISA.”
  
 For those that plan to continue to save in a workplace pension, the biggest incentive is the employer contribution with 62% stating that they wouldn’t want to miss out on this. Over a quarter (27%) say they prefer having their money locked away until retirement without the option to access it early. One in 10 (10%) believe pension saving is more tax efficient.
  
 A large proportion (41%) of those surveyed said that if they had the option, they would like to be able to put their employer’s pension contribution into their Lifetime ISA, while 21% wouldn’t want to do this.
  
 Nilsson continues: “With pension saving, savers benefit from tax relief up front, receive 25% of their pension pot tax free and then only pay tax in retirement if they have an income high enough to be taxable. For some, this will be preferable to paying tax up front with an uncertain promise of not paying tax on withdrawal.”
  

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