Apart from the complexity of choosing between this raft of shorter-term and longer-term savings options, the big concern is that the special status of pension saving as previously understood could gradually disappear.
Consider, for example, the case of a young worker with his or her heart set on buying a home. They are automatically enrolled into a workplace pension at the age of 22 but they decide that the 5 per cent of gross pay that they would have to contribute is too much when they want to put every penny into saving for a deposit. So they opt out and instead put some money into a Lifetime Isa. Unlike with a pension, the monthly saving is no longer automatic but they set up a direct debit and start to build up a worthwhile sum. A few years later they form a partnership – naturally with someone else who has a Lifetime Isa – and together the couple starts to build a decent capital sum with government top-up.
Around this point, the worker is automatically re-enrolled but they opt out again, single-mindedly focusing on money for the deposit. Money is tight and the couple are saving what they can, but another three years goes by and each is re-enrolled for a second time, and again they opt out because pensions are not for them. A few more years go by and the couple now have enough for a deposit, perhaps assisted by the ‘help-to-buy equity loan’ scheme. They take all of their money out of the Isa and put it into buying a house. They are in their early 30s and their retirement savings stand at zero.
The interesting question is what happens next?
The couple are still relatively young, but money is tight. They have borrowed as much as they can afford and there is not much spare cash after mortgage repayments, especially with their first child on the way. They have got into the habit of monthly saving into an Isa and they can see that they get a government top-up, but they decide they cannot both afford to save, so one of them cancels the direct debit. Automatic re-enrolment comes round again, but by now the workplace pension is something they have rejected repeatedly and it does not seem like a priority.
