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08 May 2017

Under-40s plan to cut back on workplace pension saving to invest in LISAs

The Lifetime ISA (LISA), which launched last month, is a more attractive savings prospect than a workplace pension for many employees under the age of 40, according to research from MetLife.

A survey by the life insurance company among 1,071 employed adults aged 18 and over found that nearly a third of under-40s intend to put less money into retirement savings and instead save money in a LISA.

Almost a quarter (23%) of under-40s said they would reduce their pension contributions in favour of LISAs, while almost one in 10 (9%) said they plan to leave their workplace pension scheme to concentrate on saving into their LISA.

The new Lifetime ISA is only open to people aged 18-39. During each tax year they can save up to £4,000 in the account, for retirement or to buy a first property, and will receive a government bonus of 25% of the contribution.

MetLife welcomed the launch of the new savings vehicle but expressed concern about the potential threat to retirement saving.

Simon Massey, wealth management director at MetLife UK, said: “The Lifetime ISA is designed to help people save for house deposits and is an advance on the Help to Buy ISA, which does not offer the same bonuses and is restricted on the value of house it can be used to buy.

“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.

“People have limited amounts they can afford to save but it should not be a case of giving up on pensions for LISAs. It is important savers get advice on how best to save for retirement as well as building up a deposit.”

On its online information page about LISAs, the government says: “The Lifetime ISA is designed to be a complement to pensions saving, not a replacement. Pension contributions can receive substantial tax relief, and your employer may make contributions to your pension as well.”

It also urges anyone thinking about opting out of a workplace pension to “consider this decision carefully”.

Copyright © M2 Bespoke 2017

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