In one sense, this is not a terrible outcome. The couple have got the home of their dreams and at least one of them is saving on a regular basis and getting the equivalent of basic-rate tax relief on their savings. But since they were both 22, they have been missing out on a contribution from their employer into their long-term savings. If they are in their early 30s they will have missed out between them on perhaps £10,000 or so of employer contribution that they will never get back. And if they continue to choose the Lifetime Isa over the workplace pension then the amount they miss out on will grow each year. Worse still, beyond 50, they do not even get the government top-up, so the Lifetime Isa starts to look like a highly unsuitable vehicle for retirement saving.
This is, of course, speculation. But you can be sure that the Government will be promoting this scheme hard, while the budget for advertising workplace pensions is unlikely to be a priority. Over time, the whole culture of workplace pensions could be undermined.
It would be ironic if an initiative branded as promoting ‘lifetime savings’ was instead to undermine the very thing that it was designed to support.
Steve Webb is director of policy and external communications at Royal London, and former pensions minister
Key points
On the face of it, the ‘Lifetime ISA’ is simply a new product which falls somewhere between a traditional short-term Isa and a full-blown pension.
The big fear is that young people, having relatively little disposable income for saving, may reject the workplace pension.
It would be ironic if an initiative branded as promoting ‘lifetime savings’ was instead to undermine the very thing that it was designed to support.
