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Lifetime ISA a threat to pension savings, says MetLife

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Nearly one in three under-40s will cut back on pension saving in favour of the new Lifetime ISA (LISA) which launched last month, research from MetLife shows.

Around 23 per cent of under-40s say they will reduce the amount they invest in their pension while another 9 per cent will leave their workplace pension scheme to concentrate on Lifetime ISAs.
 
The nationwide study among savers confirms the view of specialist retirement advisers questioned by MetLife – 69 per cent of advisers are concerned that the launch of LISAs will deter younger savers from investing in pensions potentially creating a two-tier system for retirement planning.
 
A limited number of providers have launched LISAs which enable anyone aged between 18 and 40 to save up to GBP4,000 a year tax-free with the government paying a 25 per cent bonus up to a maximum of GBP32,000. The money can be used for house deposits or kept until age 60 and used as a pension substitute.
 
MetLife’s research shows around 38 per cent of under-40s will consider investing in LISAs highlighting their growing appeal and the potential risk to retirement saving although more than one in five (21 per cent) of under-40s admit they have not heard of the new savings plan.
 
Simon Massey, wealth management director at MetLife UK, says: “The Lifetime ISA is designed to help people save for house deposits and is an advance on the Help to Buy ISA, which does not offer the same bonuses and is restricted on the value of house it can be used to buy.
 
“It is very welcome that the government is encouraging saving and the Lifetime ISA offers generous bonuses, but it is worrying if people are going to ditch pension saving in favour of LISAs. Pension savings attract tax relief and employers are duty bound to top up contributions.
 
“People have limited amounts they can afford to save but it should not be a case of giving up on pensions for LISAs. It is important savers get advice on how best to save for retirement as well as building up a deposit.”
 
The MetLife research found around 39 per cent of under-40s say the launch of LISAs will not have any impact on their long-term saving plans but more than half (56 per cent) admit they find ISA saving options confusing.

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