Four in ten employers plan to offer Lifetime Isa

The new Lifetime Isa is to be made available by over 40 per cent of employers.

A survey by WEALTH at Work, a provider of financial education, has found that 42 per cent of employers are planning to provide employees with access to the Lifetime Isa, which will be launched on 6 April.

The Lifetime Isa is designed for designed for those under the age of 40 to save for a home or for retirement; they will be able to put away up to £4,000 a year in a tax-efficient cash or stock market account, with an additional 25 per cent bonus from the government.

One concern has been the risk that people who use the Lifetime Isa as a retirement savings vehicle will lose out on employer pension contributions. A potential solution to this issue would be for employers themselves to make a Lifetime Isa available as part of the package of savings options.

WEALTH at Work conducted a survey of employers; 42 per cent of those who responded indicated they will be offering a Lifetime Isa option as part of their rewards package. However, the survey sample was a small and self-selecting one, comprising 50 responses from a website poll.

Jonathan Watts-Lay, Director, WEALTH at work, comments: ‘As we know, the workplace already supports employees with various savings vehicles to help them with their short, medium and long term savings goals.

‘This includes workplace Isas, share schemes and pensions. Such variety allows employees to choose a savings method, or a combination of methods, which are the most appropriate for them at a given point in time, so I see no reason why the Lisa wouldn’t be a great addition.

- FCA spells out need to Lisa 'risk warnings'   

He continues: ‘Employers will need to think about how they can support employees who all want to save in different ways. For example, we already see many companies giving employees a percentage of their salary to buy “benefits” so could this be a method of funding the Lisa in the future?’

However, for investors who want to open a Lifetime Isa independently of their employer, there is likely to be little choice when it launches in April. Banks and the vast majority of online brokers are so far shying away from offering the new Isa.

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Comments

The Lisa is designed in part

The Lisa is designed in part to provide a retirement income, which is what a pension does. But it is less generous than a pension if you have the option of an employer pension, because both pension and Lisa receive government contributions but the pension will also receive a contribution from the employer. The point of this survey is that it suggests employers may offer a Lisa, which would mean they could make a contribution into it in the same way as they would contribute into a pension.

Workplace benefits such as pensions (or Lisas) are not free. Pension contributions are made out of untaxed income. If you want you can talk about about investing in a Lisa rather than buying it, but the principle would be the same - part of your salary would be syphoned off into a Lisa.

A Lisa would be offered as a savings scheme set up and run by the employer in much the same way as workplace pensions are run - so the employer would offer a Lisa scheme from a provider (let's say Standard Life) and employees who wanted to sign up would set up an account, through the employer, in that Lisa.

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