This research clearly shows that employers don't consider LISA, the Lifetime Savings ISA being introduced in April 2017, to be a replacement savings vehicle to their workplace pension. If they did more would be expecting their organisation to make some contribution to the LISA as well as, or instead of, some element of their contributions to employees' workplace pensions.
Workplace pensions at minimum will make a 2% employer contribution to employee's pensions, with many employers contributing much more than this which in some cases can be as high as 20%.
LISAs don't have this and they will also have a few other components that rule them out as serious rivals to the workplace pension:
- LISAs are only available to 18-40 year olds - pensions are available as savings vehicles for all qualifying employees irrespective of age, in line with scheme rules
- LISAs will have an annual savings limit of £20,000, pensions, for most savers, have an annual savings limit of £40,000
- Savers can withdraw money from their LISA at any time - making them a much riskier vehicle in respect of providing for financial security in retirement. Pension savings cannot be withdrawn until age 55 (or scheme age) so protecting this savings fund to provide for supporting financial security in retirement
LISA, along with other ISAs, have their place to provide savers with a medium term savings option and to build capital. But employees would be foolish to give up their pension savings to 'jump ship' to LISAs and should definitely seek guidance before considering this.
EXCLUSIVE: More than three-quarters (79%) of employer respondents do not expect their organisation will contribute to the new lifetime individual savings account (Lisa), according to the Employee Benefits/Xerox HR Services Benefits research 2016, published in June. The savings vehicle was announced by Chancellor George Osborne in the March 2016 Budget. From April 2017, individuals aged 18-40 will be able to open a Lisa. This allows individuals to contribute up to £4,000 a year and receive a 25% government bonus if the money is put towards a first home or withdrawn as retirement income after the age of 60.