More than half (52%) of employer respondents believe the lifetime individual savings account (Lisa) is likely to discourage younger employees from saving into a workplace pension, according to research by the Association of Consulting Actuaries (ACA).
Its 2016 smaller firms pension survey, which surveyed 455 organisations with less than 250 employees, also found that 72% of respondents are confused by the planned launch of the Lisa in April 2017 given the government’s promotion of workplace pensions through auto-enrolment.
The research also found:
- 23% of respondents feel that younger people should be encouraged to save into a Lisa rather than a workplace pension.
- 31% of respondents believe the Lisa will have no impact on workplace pension saving.
- 50% of respondents think the Lisa should be supported and will be popular with younger employees.
- 33% of respondents believe the current structure of pension tax relief should remain unchanged.
- 60% of respondents feel the current pension tax system should be retained with more help targeted on lower income groups.
- 44% of respondents believe that pension tax relief should be further restricted for individuals on a higher income.
- 25% of respondents think pension tax relief on contributions should be abolished and pensions should be paid tax-free.
- 13% of respondents would support the removal of national insurance contribution relief on employer pension contributions.
Bob Scott (pictured), chairman at the ACA, said: “Initiatives to encourage saving generally are to be welcomed, but incentives need to be viewed in a holistic way so that longer-term saving attracts greater support and so that one product does not compete or conflict with another.
“While Lisas may not initially discourage younger employees from opting out from auto-enrolment pensions while minimum employee contributions are below 1% of earnings, there must be a real query over whether this will remain the case when minimum employee contributions climb to over 3% of earnings in 2019, and possibly higher levels in years to come.
“Wholesale reform of pensions tax is long overdue; the more tinkering the government does the more that individuals and their employers lose confidence in pensions.”