A government contribution of £1 for every £4 put aside for their first house or their retirement must have sounded somehow too simple to many young savers but, as some auto-enrolment experts have pointed out, that's because it might just be.
The Work and Pensions Committee has today announced that it is re-opening its inquiry into auto-enrolment after concerns were raised over how the recently proposed Lifetime Isa (Lisa) will interact with the system designed to get more people saving into a workplace pension.
Concerned parties, included representatives from the Association of British Insurers and the Pensions and Lifetime Savings Association, warned the Committee that the Lisa may directly contradict what auto-enrolment is aiming to do, as young savers may be more concerned with the shorter term goal of getting their foot onto the property ladder than the longer term objective of saving for comfortable retirement.
The Committee is now seeking written submissions until 17 April and will be focusing on issues such as the extent Lisa is compatible with government's overall pensions strategy, which groups of people could be better off saving through Lisa rather than through auto-enrolment and the guidance is available to young adults trying to decide where best to put their money.
Welcoming the announcement to re-open the inquiry, Steve Webb, former pensions minister and now director of Policy at Royal London, said:
The big fear is that young people, having relatively little disposable income for saving, may reject the workplace pension into which they have been automatically enrolled in favour of a Lisa. The consequence of this is that they will lose the valuable employer contributions that they would have otherwise have received. It would be ironic if an initiative that is branded as promoting ‘lifetime savings’ was to undermine the very thing it was designed to support.