The government’s new Lifetime ISA (LISA) is a direct attack on the UK pensions industry, according to members of the Association of Member-Directed Pension Schemes (AMPS).
LISA, announced in Chancellor George Osborne’s Budget in March, will allow 18 to 40-year-olds save up to £4,000 a year tax-free from next April. They can then benefit from a 25% top-up by the government if the money is used to buy a home or for retirement.
However, 87% of AMPS members agreed with industry concerns that employees will opt out of contributing to pension pots in favour of LISA, and that this is a “back door” change to the UK pensions taxation system.Chairman Neil MacGillivray said the industry is concerned that lower-income earners will be less likely to save through a pension scheme.
“There is a deep concern within the pensions industry that the LISA is a threat to pensions,” he said. “The LISA is a more attractive option for basic income tax earners because it will get a better return than saving in pensions.
“We would like to see the government do more to reassure us that it can work hand-in-hand with pensions.”
Although savers can contribute to both LISA and a pension, industry experts believe that those who cannot afford to do both will favour LISA.
AMPS’ criticism echoes a similar survey by pension provider Dentons last month which revealed that 80% of advisers think that the introduction of LISA spells the end for pensions.
At the time, Dentons director of technical services Martin Tilley said: “There is a strong belief that the introduction of the LISA is the means by which the government will phase out future funding of the UK pension system as we know it.”
AMPS surveyed attendees at its recent technical seminar and found 81% would like HM Revenue & Customs to consider introducing mandatory professional trustees for small self-administered schemes.
The association believes that the requirement would speed up transfer requests.
AMPS’ survey also revealed that 51% of their members would vote against Brexit in the EU referendum planned for 23 June.
However, with less than 50 days until the vote, another 31% were still unsure. Meanwhile, 62% of the members said they were already bored of hearing about the referendum.
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