LISA savers reject pensions but could have been mis-sold
What is LISA?
A LISA is a life time saving account which was launched on the 6th of April 2017. Being offered by only a few providers, the LISA is a tax free package that lets you save up to £4,000 every year. This can be cash savings or a stocks and shares version. Anyone who is aged 18 to 39 can open a LISA and you also get a 25% bonus which is paid by the government to encourage you to save.
For a £4,000 payment you will get a further £1,000 contribution from the government.
But according to the research carried out by CoreData, 34% of those surveyed planning to invest in the Lisa will cut the amount of money they put into their own pension, while 7% will stop putting money into it altogether.
Mis-selling Scandal
The results of the research have indicated that the LISA could be the next mis-selling scandal as foreseen by Baroness Ros Altmann, former pensions minister, last September.
She warned the LISA isn’t as beneficial as a pension following the introduction of the retirement freedoms legislation which came into effect in April 2015. Baroness Ros Altmann Stated: “In my view Lifetime Isa’s risk poorer pensioners in the future and it is a disaster in the making”.
She also added that “This product has mis-selling written all over it. Just think about it from a customer’s perspective. The Lifetime ISA isn’t a simple product. It needs somebody to understand the whole environment.”
5% Leaving Penalty
Unlike an ISA, the LISA has restrictions which need to be considered in that you need to use it to buy your first home or wait to get access to the savings after the age of 60 to keep your bonus. Otherwise there is a 5% leaving penalty & charges, as well as a loss of investment on the added bonuses.
The research has revealed that just over 50% of those who had invested in a LISA were using it for retirement and only 41% were going to use it to pay for a property purchase – not what the Government intended. The industry regulator, the FCA has also stated in a report that it does want investors to be warned about the pitfalls of opting out of the work based pensions in favour of the LISA.
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This article lisa savers reject pensions was originally published on Thursday, May 18, 2017
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