A Lifetime Isa takeover? Hordes of British youngsters opt-out of a workplace pension for the government's new saving product

 
Oliver Gill
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The research indicates over half of Britain's under-40's don't really understand Isas (Source: Getty)

Almost 1.7m of Britain's youngsters will bin workplace pensions in favour of saving into a Lifetime Isa, latest research has indicated.

The Lifetime Isa (Lisa) was launched in April and enables 18 to 40-year-olds to save up to £4,000 a year tax-free, with the government paying in a maximum of £1,000 on top.

In the run-up to the Lisa launch, some experts feared it would deter saving into pension pots.

And according to analysis by MetLife this is exactly what has happened.

Read more: In defence of the Lifetime Isa

Some 23 per cent of respondents to MetLife's poll said saving into a Lisa will reduce how much they will put into retirement savings.

Meanwhile, a further nine per cent said they would leave their workplace pension completely, using the Lisa to save instead. Figures from the Office for National Statistics show there are around 18.5m Britons between the age of 18 and 40 in 2015. Therefore, the research suggests 1.67m of them will dispense with a workplace pension.

The news confirms the concerns of financial advisers polled separately, with 69 per cent of them fearing the Lisa launch will deter younger savers from investing in pensions.

Education

As the General Election approaches, experts have called on political parties to commit to help Britons with financial education.

Earlier this week Hargreaves Lansdown called for "a strengthened obligation for the teaching of financial education in schools" as one of its four key demands.

Read more: What is the Lifetime Isa and is it worth it? Here's what you need to know

And the MetLife research showed that despite the attraction of the Lisa, more than half of respondents (56 per cent) admit they find Isa saving options confusing.

MetLife wealth management director Simon Massey said: “It is very welcome that the government is encouraging saving and the Lifetime ISA offers generous bonuses, but it is worrying if people are going to ditch pension saving in favour of Lisas.

"Pension savings attract tax relief and employers are duty bound to top up contributions."

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