Richard Parkin, head of pensions at Fidelity International, says Yes.
The reasons why younger people don’t save enough for the longer term are numerous, but fundamentally they boil down to the feeling that they can’t afford it or that there are too many other demands on their funds. The Lifetime Isa is definitely not a magic bullet, but it will certainly help in incentivising the younger generation who will yearn for a house but still feel that nagging feeling that they should really be saving for retirement. What makes the Lifetime Isa doubly appealing is that it tackles the thorny issue of accessibility which can often put people off. Yes, there are clear incentives to “stay in the game”, but taking money out early is nowhere near as punitive as saving elsewhere in a locked box. Overall, anything that just makes saving for the longer term seem vaguely more appealing is a very good thing indeed, and can only be welcomed as we look to tackle the savings gap.
Steve Webb, director of policy at Royal London, says No.
A flexible new savings product for younger workers sounds superficially attractive, but it opens up the risk of people making damaging choices. Millions of people in their twenties and thirties have just been automatically enrolled into a workplace pension, benefiting from an employer contribution, full tax relief and the chance to build up a tax free lump sum. More than nine out of 10 people in their twenties have stayed in pensions rather than opting out, but this progress risks being undermined. If they choose a Lifetime Isa instead of a pension, they will lose their employer contribution and the chance to access their cash at 55. Any money they take out of the Isa is subject to a hefty 5 per cent exit penalty. With few young workers having access to financial advice, there is a real risk of them making poor decisions and getting bad outcomes – and all because the chancellor wanted a shiny new initiative to announce in his Budget.