There’s lots going for it—but there’s also a lot to get wrongby Iona Bain / April 19, 2017 / Leave a comment
It is still Britain’s foremost means of saving for retirement. But is the mighty pension facing its biggest crisis yet? That’s the question as the Lifetime Isa launches, though not in the blaze of glory that its architects might have hoped for.
The Lifetime Isa (LISA) was unveiled in last year’s Budget by former chancellor George Osborne. Aimed at satisfying two major financial ambitions—home ownership and a prosperous retirement—the LISA provides a tax-free savings and investment shelter for both, with a generous 25 per cent government bonus. Available for all under 40s, the product caps annual contributions at £4,000, meaning that someone saving from the earliest allowed age (18) up to the product’s maturity age (60) would gain £32,000 in government cash.
However, experts believe the capacity for misselling is enormous. The LISA gives you two options—you can leave your money in cash, or invest it in stocks and shares. That leaves a huge potential to choose the wrong assets at the wrong time. Someone saving for a home should not effectively gamble their deposit in the vagaries of the stock market when they only have a short-term window. Conversely, someone saving for their retirement will find cash rates so pathetic, and cumulative inflation so damaging, that they need to be invested smartly in the stock market to have any shot at a decent nest egg.
The complexities of investing are a mystery to most young workers. Nevertheless, they could gravitate towards an investment LISA given that so far the cash version is nowhere to be seen. Potential providers are holding back on launching the product amid concerns about mis-selling claims further down the line.