The new Lifetime ISA (LISA) will be available from April 2017 for individuals under the age of 40, which can be used for buying a first home or for retirement. The introduction of the LISA has raised some important questions for the future of pensions and long term savings.
One question which is being discussed is – will the LISA be introduced within the workplace as part of a reward package? WEALTH at work, a leading provider of financial education, guidance and advice in the workplace, carried out a poll* and found that 42% of employers who responded will provide access to the proposed LISA through their reward packages.
Jonathan Watts-Lay, Director, WEALTH at work, said: “It is great to see that many employers will provide access to the LISA through their reward packages. As we know, the workplace already supports employees with various savings vehicles to help them with their short, medium and long term savings goals. This includes workplace ISAs, share schemes and pensions. Such variety allows employees to choose a savings method, or a combination of methods, which are the most appropriate for them at a given point in time, so I see no reason why the LISA wouldn’t be a great addition.
“In fact, saving into a LISA can actually help employees to save for a deposit faster than using a savings account, and that by getting them into the savings habit; it may also actually increase their pension pot.”**
He added: “Employers will need to think about how they can support employees who all want to save in different ways. For example, we already see many companies giving employees a percentage of their salary to buy ‘benefits’ so could this be a method of funding the LISA in the future?
“Whether employees decide the LISA or another savings method is right for them, the need for financial education, guidance and advice has never been more apparent.”
*Statistics quoted are from the Lifetime ISA poll carried out on the WEALTH at work website from August 2016 until March 2017. The poll asked ‘Will you provide access to the proposed Lifetime ISA through your reward packages?’ and received 50 responses. The full results are available here www.wealthatwork.co.uk/corporate/your-say/polls/
** Research by WEALTH at work demonstrated that the 25% guaranteed bonus which comes when saving into a LISA, means that it could actually help employees to save for their first mortgage deposit much quicker than if they save into a high street savings account; and that by achieving this earlier, they are then able to start saving more into a pension earlier than would otherwise have been the case. See here for further details http://www.wealthatwork.co.uk/corporate/2017/03/01/lifetime-isa/