Commenting on the new Lifetime ISA, Steve Webb, Director of Policy at Royal London, said:
"Just at the point that millions of under forties have started pension saving for the first time, the Chancellor has set up a rival product which risks causing mass confusion. Young savers who opt out of pensions in favour of a lifetime ISA lose the contribution from their employer and the chance to build a tax-free lump sum from a pension pot - how will they know which is right for them? Young workers have had some of the lowest opt-out rates when they have been enrolled into workplace pensions, yet the Chancellor's desire for a shiny new initiative could undermine the huge progress which has just been made in ensuring young workers have savings for retirement.”
Commenting on the introduction of a Lifetime ISA for under 40s , Simon Laight a pensions expert at international law firm Pinsent Masons said:
“Chancellor George Osborne has cleverly sidestepped the backlash over proposed reforms of the tax incentive to save. Rather than compulsorily making the change to a Tax Exempt Exempt (TEE) system, he has made it voluntary. We await the details but it looks like consumers under 40 can opt to take out a lifetime ISA; which has increased flexibility to pay money in and take money out. It will therefore be more attractive to many. The target consumers will shy away from the standard Exempt Exempt Tax (EET) tax system for pension savings and instead favour the lifetime ISA. Less money going into EET means lowering the Chancellor’s yearly tax relief spend i.e. it brings forward tax receipts. He has brought in limited TEE via the back door. We await details of how much this is likely to contribute to the forecast budget surplus.”
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