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Lifetime ISA could double workplace savings

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Including the Lifetime ISA (Lisa) in the national workplace pension scheme could more than double employees’ savings, according to the firm whose proposals were adopted by the Chancellor.

The Government plans to increase auto-enrolment (AE) contributions from 1 per cent to 8 per cent by 2019, but is fearful of sparking a surge in those choosing to opt out. Approximately 10 per cent of employees currently choose not to take part in AE. 
 
Official figures* show that on average savers contributed GBP6,064 to ISAs in 2014/15 compared to GBP2,840 for personal pensions. The firm that has proposed an enhanced ISA since 2013 points to the behavioural evidence as proof that on a level playing field, savers voluntarily put more into an ISA than a pension.
 
The Lisa will be available from 2017 with a 25 per cent government top-up, equivalent to basic rate pensions tax relief. But so far there are no plans to make it available under AE.
 
True Potential Investor has already submitted evidence to the Work and Pensions Select Committee’s inquiry into the Lisa’s compatibility with AE. The firm is also working with the Treasury to advise on implementation. 
 
True Potential Investor Managing Partner, David Harrison (pictured), says: “Auto-enrolment is successfully overcoming the inertia that prevents people from saving for retirement but it would be a mistake to ignore the behavioural evidence and exclude the Lifetime ISA. Workplace pensions benefit from employer contributions so the Lisa will be at best complementary for those who can afford to have both products under the existing proposals.
 
“Almost GBP80 billion was saved into ISAs last year compared to GBP20 billion in personal pensions so it is clear that on a level playing field, ISAs win. Adding the Lisa to auto-enrolment could help reach the Government’s aim of raising contributions without increasing opt outs because the public is already there with ISAs.
 
“The Lifetime ISA inside auto-enrolment is a win win, but the pensions industry will attempt to strangle it at birth. The Government should give its policy the greatest chance of succeeding by including it in auto-enrolment from next year.”
 
True Potential has already confirmed it will offer the Lisa to consumers from next April.

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