The man driving the development of the Isa tax model to replace pensions tax relief says the Lifetime Isa bonus and annual allowance should be doubled.
Speaking at Money Marketing’s Retirement Strategy Summit last week, Centre for Policy Studies research fellow Michael Johnson said the new Lifetime Isa – due to launch in April 2017 – should be made more generous.
He said: “The next steps we are considering with the Lifetime Isa is to potentially double the bonus rate, from 25 to 50 per cent and secondly to increase the annual allowance from £4,000 to £8,000.
“Part B is then to scrap all tax relief. Part C is to scrap the lifetime allowance, because it is irrelevant to 99 per cent of the population, and replace that with the higher annual allowance and bonus. Then we should lower the age when you can open a Lifetime Isa to six-weeks-old.
“Then what we doing is pre-funding the state pension, in which case you can scrap the state pension. Because, let’s not kid ourselves, the state pension is rapidly becoming ludicrous.”
The Government unveiled the Lifetime Isa in the March Budget when it is widely assumed bigger plans to scrap pensions tax relief entirely were shelved because of the impending Brexit vote.
Under current proposals the product is open to those under-40s who will receive the bonus up to the age of 50. It can be accessed early, without penalty, for first time house purchase. The Government is considering allowing early access for other life events.