Around 800,000 people will be saving through the Lifetime Isa by 2020/21, and the new vehicle’s impact on pension saving will be negligible says the Government.
Publishing the impact assessment for the Savings (Government Contributions) Bill 2016/17 which receives its second reading in the Commons today, the Government says expects 200,000 people to save in a Lifetime Isa in 2017/18 with an average contribution of £3,500. That would make a Lisa market worth £700m in 2017/18.
The Government projects a negligible impact on the pensions system, predicting a saving of just £10 million in tax relief as a result of investors moving away from personal pensions into the Lisa instead. It also predicts a cost to the Exchequer by 2021/22 of £850 million as a result of the Lisa top up being paid.
Hargreaves Lansdown head of retirement policy Tom McPhail says: “The Lisa will undoubtedly prove popular with those savers who want the flexibility to save for the long term, benefit from the government top up but who also want to retain access to their savings. In the short-term, having announced the idea it makes sense for the Government to press ahead with the launch of the Lifetime Isa, especially as we know Isa providers will be ready to meet investor demand in 2017. However in the longer term, there is clearly more work to do to tidy up the increasingly messy savings landscape for investors. We’d like to see all the different Isas brought together in one simple ‘super Isa’ and for pension tax relief to be radically reformed for a simpler, fairer and more cost-effective system.”
