House of Commons
Work and Pensions Select Committee
Committee Re-Opens Auto-Enrolment Inquiry For New Evidence On Lifetime ISAs
In the 2016 Budget, the Chancellor announced the introduction of a Lifetime ISA, which will be available to any adult under 40 from April 2017. People will be able to save up to £4,000 each year and will receive a 25% bonus from the government on every pound they put in, until the age of 50.
Stakeholders have raised concerns that the LISA could undermine the auto enrolment project as people may choose to save in the LISA instead of their employer pension. People may also not understand where their money would be better off, or the benefits of employer contributions.
The Committee has heard concerns that there may be a disparity between what the Treasury is trying do and the aim of auto enrolment. If people don’t enrol in the workplace pension and take their LISA savings and buy a house, they won’t be saving for their pension. In evidence to the Committee on 23 march, Huw Evans, Director General at the ABI said "The critical element of all this is that it doesn’t end up encouraging employers to say "choose the LISA instead", and thereby trying to duck out of their contributions. That would obviously run completely contrary to the grain of public policy that’s been agreed on a cross-Party basis for the last ten years". He further noted that if more affluent under-40s take cash from their existing ISA and put it in the LISA to earn the Government contributions, that isn’t necessarily a good use of public money.
In the same evidence session, Joanne Segars from the PLSA told the Committee "We would be quite concerned if people took up the LISA option at the expense of matching contributions into their pension scheme."
The Committee is inviting further written evidence on the following points with a deadline of 17 April 2016: