Outgoing Pension Minister Says Drop Lifetime ISA

Outgoing Pension Minister Says Drop Lifetime ISA.

In an interview with finance industry newspaper Money Marketing, outgoing Pensions Minister Dr Ros Altman has suggested that the Government has its savings gap and pension policies all wrong.

Dr Altman suggests that pensions are pensions and we should be encouraging people to develop alternative savings habits.

The new Lifetime ISA is due to start in April 2017, where savers below the age of 40 can save up to £4,000 pa which then receives at 25% bonus from government when funds are withdrawn.  The flexibility of the Lifetime ISA is that first time buyers will be able to access their savings early to buy a home.  If not, then the fund can continue as a savings vehicle to be accessed in retirement.

She also criticised the complexity of pensions for people who build up significant funds with tax charges for those with a pension fund of over £1,000,000 (the lifetime allowance) and also the reduction in the yearly amount you can save in pensions (annual allowance) reducing from £40,000 by £1 for every £2 you earn above £150,000 down to a minimum tapered annual allowance can of £10,000pa.

Comment

We have to agree with some of Dr Altman’s views.  We agree that the complexity for pensions and tax charges at the higher earner end has resulted in complex pensions advice in addition to discouraging people from saving or indeed resigning from pension schemes or even in extremes, their jobs.  At the lower end, we disagree, people need flexibility to be able to access their savings.  It is hard enough for younger people to get on the property ladder and any form of savings incentive that encourages us all to save regularly and get into the habit of saving is a good thing. Perhaps there should be limits on how much you can access from your Lifetime ISA or pension early.