MPs re-open auto-enrolment probe over Lifetime Isa fears

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Parliament’s Work and Pensions committee is to re-open its investigation into automatic enrolment amid fears the new Lifetime Isa could undermine the reforms.

The committee first revealed plans to look into auto-enrolment in December last year, with a specific intention to probe its effectiveness and lessons learned since the reforms were launched in October 2012.

The initial investigation was planned to close after last month’s session, which saw MPs urged to radically expand the programme so lower paid workers are also nudged towards pension saving.

However, after a subsequent meeting with the Association of British Insurers director general Huw Evans and Pensions and Lifetime Savings Association chief executive Joanne Segars saw the pair warn the committee of the risk of the Lifetime Isa impacting enrolment, MPs will now re-open their investigation.

MPs will take written evidence until 17 April.

The Lifetime Isa was unveiled by Chancellor George Osborne in the Budget earlier this month. The product, due to launch in 2017, will allow savers under 40 to pay in up to £4,000 a year and receive a Government top-up of 25 per cent.

Any money saved into the product prior to the individual’s 50th birthday will receive the 25 per cent top-up.

Savings and the Government top-up can be used towards a deposit on first home worth up to £450,000, or withdrawn tax-free after the individual’s 60th birthday.

Money withdrawn before age 60 loses the Government bonus (plus interest and growth on this), and is subject to a 5 per cent penalty.