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Govt rejects MPs’ call for ‘urgent’ Lifetime Isa study

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The Government will not commission a study into the possible impact of the Lifetime Isa on pensions.

The Work and Pensions committee of MPs recommended “urgent research” on how the launch of the Lifetime Isa in April 2017 might hit pensions savings through auto-enrolment.

Ex-pensions ministers Ros Altmann and Steve Webb have previously warned the new savings product might tempt younger savers to opt out or reduce pension contributions.

But the Government says it “does not currently intend to commission new research to predict the impact of the Lifetime Isa on individual behaviour in advance of implementation, but will continue to monitor the success of automatic enrolment in terms of workplace pension participation, opt-out rates, and contribution rates.”

It adds there will be an impact assessment as part of the normal legislative process in the autumn.

It notes the Treasury’s 2016 Budget costing did not anticipate any impact on revenue as a result of individuals opting-out of schemes to save into a Lifetime Isa instead.

As part of its report on auto-enrolment, the committee also recommend HMRC expand the Basic PAYE tool system to help small business comply.

But the Government rejected the proposal because the tax office is developing the Application Programme Interfaces.

Saga Investment Services head of consumer affairs Gareth Shaw says: “By refusing to look further at the effect of the Lifetime Isa on auto-enrolment, the Government is making clear that it doesn’t see this new savings vehicle as a threat to its flagship pension project.

“Auto-enrolment has been largely successful so far, and this should not be undermined by the headline-grabbing Lifetime Isa, which will undoubtedly be very attractive to younger savers.

“But while the Government says it is not placed to tell people where it should invest their money, it has a duty to encourage good saving behaviour. Saving into a pension, with the addition of upfront tax relief and largely tax-free growth, is one of the most sensible financial steps someone can take, and this should be enthusiastically encouraged.

“We hope the DWP committee to continue to hold the Government’s feet to the fire on this issue.”

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  1. Scrap the Lifetime ISA now. Too complicated and has too many penalty considerations

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