Lifetime ISA is not an alternative to pensions, Unison warns

The shortage of people saving for retirement is not likely to be tackled by the government’s new lifetime ISA scheme, trade union Unison has warned.

The lifetime ISAs (LISAs) were announced as a flagship policy in the March budget, designed to allow people aged 25 to 40 to save for a new home or retirement by receiving a 25% government bonus for savings of up to £4,000 every year.

However, in its written evidence to the Work and Pensions Committee about the new policy, Unison, the UK's largest public service trade union with 1.25 million members, warned that “it is difficult to see” how the LISAs are compatible with auto enrolment in pension schemes because they rely on contributions from the employee, instead of the employer. The budget also contained a £2bn increase in public sector employer pension contributions.

Unison added that it “does not see how a LISA can be a realistic alternative to a pension arrangement for the vast majority of our members”.

In its evidence the union added that it is “very concerned” that the introduction of a LISA is a precursor to reducing tax relief.

“In our view the money the government is spending on LISA is likely to benefit most those on higher incomes and with disposable cash to put in a LISA and get the bonus,” Unison concluded.

Unison said that those with disposable income or wealthy parents could use the LISAs to supplement their pension schemes, whilst for those with a lower income saving £4,000 a year was “a luxury they will not be able to afford”.

Additionally, the union claimed that tax-free income after retirement would not benefit most of its members because they were below the threshold to pay tax anyway. It also warned that allowing savers to spend their LISAs on buying a first house could have “catastrophic” consequences if they used up their savings before retirement.


Kirsty Jones   03/05/2016 at 15:26

It is a farce I employ 48 people and my husband employs 23 more not one of them could afford to save£333.33 every month . Most people have an overdraft.

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