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Lifetime Isa architect: Put auto-enrolment contributions into Lifetime Isa

CPS research fellow Michael Johnson

The architect of the Lifetime Isa has hit back at criticisms that it will cause people to save less into pensions, arguing that auto-enrolment contributions should be channeled directly into the new savings vehicle.

The Lifetime Isa goes live on Thursday, with those between 18 and 40 able to pay in up to £4,000 each tax year, with contributions qualifying for a 25 per cent government bonus towards their first home or retirement.

In a briefing note sent out through his think-tank the Centre for Policy Studies, Lifetime Isa architect Michael Johnson says that in future, employee contributions under auto-enrolment should come out of post-tax income and straight into the Lifetime Isa, gaining the same 25 per cent bonus.

Employer contributions should be put into a new Workplace Isa to sit within the Lifetime Isa wrapper, Johnson adds, attracting the same bonus but taxed at the employee’s marginal rate, and untouchable until age 60.

Johnson says: “The Lifetime Isa is accompanied by concerns that it could be so attractive as to encourage employees to opt out of automatic enrolment, thereby missing out on their employer contributions. Such ironic flattery, that the Lifetime Isa is too attractive, is unheard of amongst savings vehicles.

“There is no intention to undermine automatic enrolment. Indeed, we now have an opportunity to reinforce automatic enrolment, by expanding its reach into the Lifetime ISA.”

In future, Johnson adds, “ideally, the Lifetime ISA will be offered by non-traditional providers such as Facebook and Google.”



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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Just when legislation had gone to the dizzy lengths to put everyone in a pension, one genius steps forward and creates a Lifetime ISA. I don’t know what’s worse the idiot that created it or the cretins that allow the plan to move forwards.

  2. “ideally, the Lifetime ISA will be offered by non-traditional providers such as Facebook and Google.” I wouldn’t invest with these in my lifetime (ISA)!

  3. And the simple formula for the (employer’s and employee’s) tax relief is……?

    Two different systems for those under and over 40 at outset?

  4. It is too much to hope that the whole idea will be scrapped! Thoughtless legislation like this is bad for the industry and even worse for the public, who are confused enough.

  5. Has anyone clarified how the arbitrary cap on age for LISA applicants can’t be judged as age discrimination?

    I’m not suggesting I’d rush out to get one, I just find it interesting there is a new financial planning product that, if you’re over 40, you’re not allowed to have!

  6. Is it not just a way to generate more tax now for the government rather than them receiving the tax at crystallisation/drawdown phase…? I wonder if they have worked out the difference on the tax they would get 30 years down the line from pension pots that have grown versus tax from small monthly regulars at source they will receive now

  7. Can someone please get the architect “genius ” of LISA to make public the details of of his pension provision ?

  8. What a load of ??

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