Royal London has called on the Government to offer impartial guidance for savers who want to put money into Lifetime Isas.
In its submission to the Work and Pensions Committee’s inquiry on automatic enrolment, the firm argues savers should have access to guidance before making choices about workplace pensions and Lifetime Isa.
Royal London says guidance could be provided as part of the role of a new pensions guidance body, to be formed in 2018 and bringing together The Pensions Advisory Service and Pension Wise.
The provider says savers should only be encouraged only to take out a Lifetime Isa after first contributing to an existing pension, and receiving employer contributions in kind.
The Lifetime Isa is due to launch from next April, and will offer savers a Government top-up of 25 per cent to savers’ contributions, up to a maximum bonus of £1,000 a year.
Savers can access the funds at retirement, or earlier if they wish to buy their first home.
Royal London business development manager Jamie Clark says: “We are concerned that young savers, who are unlikely to have a lot of money to spare, will opt out of their workplace pension and choose to maximise their contributions to the new Lifetime Isa instead.
He adds: “Equally, to protect the thriving workplace pensions market, Government must make it clear that employees should take full advantage of the valuable employer contribution into a workplace scheme before they consider the Lifetime Isa.”