Happy Birthday LISA (…almost!)
28 Feb 2018 - Estimated reading time: 3 minutes
As we approach April, it’s time to start the preparations to celebrate the first birthday of the Lifetime ISA (LISA) – but will anyone be attending the party? Although recent figures suggest that over 100,000 LISAs have now been opened to by individuals1, it’s fair to say that amongst providers and employers there hasn’t been an overwhelming amount of enthusiasm, innovation or interest. As a result LISAs have not taken off as a workplace savings vehicle at all.
It’s a shame as the fact that over 100,000 LISAs have been opened via the offerings from the handful of high street providers in the market just goes to show that under 40’s are hungry for the products like the LISA. Indeed, when the LISA was first announced in the 2016 Spring Budget, our own research showed there was a real appetite for this type of long-term savings product. When asked if they would consider opening a LISA, 61% of under 40s said they would. These findings suggest there is an opportunity for employers to engage with a whole new generation of savers looking for increased flexibility.
The problem is that employers don’t have a similar appetite for the LISA, and without employer demand providers are not innovating corporate versions of the LISA. This lack of appetite can probably be attributed to the belief that rather than working alongside a pension, the LISA is a competitor with a traditional workplace pension. Unfortunately, many view the situation as a ‘one or the other’ option rather than both being able complement each other.
While I believe the LISA presents an opportunity for employers juggling an increasingly different multigenerational workforce, and that it has a place within an employer’s financial wellbeing package, I do also appreciate some of the reasons that it hasn’t taken off in the workplace yet. At the moment, pensions and the LISA are not well aligned to run alongside each other. Some of the LISA’s current rules don’t help – why not lower the access age (currently 60) to be the same as a workplace pension (55) and why can LISA savers not continue saving into the vehicle after the age of 50?
If the government could tweak some of the rules around the LISA to bring it more in line with a workplace pension, it could help employers and providers begin to see at as complimentary to a workplace pension rather than a competitor. Used together they could help individuals address their two biggest savings priorities, house purchase and retirement.
I think that employers that look further into the opportunity of integrating LISAs into their workplace benefits package now, could gain a competitive advantage in the battle for top-talent. What is more appealing to a potential employee? The employer that can offer a range of long-term savings options for a multi-generational workforce or only a pension?
If demand increases from employers we will begin to see innovation from the providers. Who can predict what the next year will bring? Personally, I hope that LISA’s second birthday is more of a celebration than its first!