Nearly one in three under-40s will cut the amount they invest into their pensions or leave workplace pensions in order to concentrate on saving into Lifetime Isas (Lisas), new research from insurer MetLife shows.
Its study found more than two in ten (23%) people under 40 say they will reduce pension contributions in favour of Lisas while almost one in ten (9%) will quit workplace pensions so they can invest in Lisas.
The Lisa, which launched on 6 April 2017, is available to savers under age 40. It offers bonuses enabling them to save for properties as well as for retirement. You can deposit up to £4,000 a year with the government topping up savings by 25% - up to a maximum of £1,000 each year. The money saved can be put towards a first home, or accessed when you reach 60.
However, advisers are worried about the potential impact of Lisas – 69% believe they will harm retirement saving creating the risk of a two-tier pension saving system.
MetLife’s research shows around 38% of under-40s will consider investing in Lisas, highlighting their growing appeal and the potential risk to retirement saving, although more than one in five (21%) of under-40s admit they have not heard of the new savings plan.
‘People should not give up on pensions for Lisas’
Simon Massey, wealth management director at MetLife UK says: “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.”