Research reveals that people want both forms of workplace saving
While concerns have been raised in the pensions industry that the introduction of the Lifetime ISA (LISA) might detract from pensions saving, new research from Hymans Robertson shows that over two thirds (68%) of employees under 40 would save into a LISA alongside a pension.
This is positive news for the industry, particularly since 61% of workers under 40 told Hymans that they plan to open a LISA if possible.
Nonetheless, the pensions and benefits consultancy has warned that employees who want to save into both that they must carefully consider tax efficiency when they make decisions.
Paul Waters, partner at Hymans Robertson, comments: “Those who considering ditching pension savings in favour of a LISA will need to consider what they are looking for in their long term savings. It will be important to assess the differences between a LISA and a pension, especially in terms of tax efficiency. The right choice will depend on whether they need flexibility (cited as attractive by 36%), the incentives available to them, such as the LISA government top up, and the level of income tax they pay.
“There is complexity and people need support and guidance to make the right decisions for them to avoid making the wrong choices. Our research found that there is still a minority (18%) who said they would redirect savings to a LISA. Employers have a role to play here. Being on the front foot and integrating the LISA in the workplace would allow employers to guide and inform their staff’s decision making.”
While many providers are not yet ready to launch a LISA product, it is likely that the savings vehicle will soon take off in popularity: research from WEALTH at work, a leading provider of financial education, guidance and advice in the workplace, shows that 42% of employers who responded to a poll, plan to provide access to the LISA through their reward packages.
Jonathan Watts-Lay, director, WEALTH at work, says: “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. 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.”
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