Trustnet Magazine Issue 27 March 2017 | Page 12

/ LIFETIME ISA /
Jeffrey Mushens , technical policy director at not-for-profit group the Tax Incentivised Savings Association ( TISA ), agrees with Nicol : “ The success of the Help to Buy ISA shows that there are many people who would take advantage of government incentives to save . The Lifetime ISA provides much needed encouragement for those who currently find it hard to save or to consider doing so .”
Nicol also says the introduction of the Lifetime ISA will help individuals realise they need to take more responsibility when it comes to saving for their retirement , adding it would take a great deal of optimism to believe the government alone will provide a comfortable income for those retiring in 40 years or more .
“ The triple lock , [ the mechanism currently used by the government for uprating the basic state pension ] which will not last much longer , has dragged
Saver opens a Lifetime ISA , makes contributions and gets a goverment bonus each tax year
EACH YEAR
25 % bonus
Max £ 4,000 yearly contribution
Source : HM Treasury
GROWING FUND
25 % bonus
Savings including tax-free interest and investment growth
THE LIFETIME ISA
Saver may use savings to buy their first home
saving

“ I keep telling my children : ‘ Forget it . The government will be bankrupt by the time that you retire .’”

pensions up to a hardly princely £ 155 per week ,” he says .
Tim Stevenson , manager of the Henderson Euro Trust , is even more blunt . “ I keep telling my children : ‘ Forget it . The government will be bankrupt by the time you retire . If you don ’ t save for your own retirement , through something like an ISA – and by the way , I can recommend a good fund – you ’ ve got a real problem .’”
The savings , including the bonus , can be used on a first home worth £ 450,000 saving
Saver can withdraw savings in retirement
All remaining savings , including the bonus , can be withdrawn tax-free when saver turns 60
A FEW ISSUES However , Nicol has a few issues with the Lifetime ISA . To start with , he says that by purporting to be both a short-term savings product and a pensions vehicle , it will confuse millennials about the need to save for old age .
He also warns against using it as a substitute for a pension , pointing out that individuals have hardly proved to be adept at planning for their retirement , hence why autoenrolment was introduced .
“ One only has to look at the millions that have been removed from pensions under liberation scams and the contortions some pension holders are prepared to go through to get hold of their pension pots . It will take a will of iron to not touch a Lifetime ISA over 40 years if access is a phone call away ,” he says .
Recent research carried out by TISA underlines the desire for greater flexibility in savings plans .
In a survey of 223 industry professionals and members of the public , 69 per cent of respondents said the Lifetime ISA would be improved if penalty-free withdrawals were allowed in case of critical illness and 52 per cent said they should be allowed in case of redundancy .
Adrian Boulding , policy strategy director at TISA , says this shows that there needs to be more short-term incentives to save .
“ People will typically make sacrifices up to about five years , beyond five years it is harder for human beings to plan for lifetime events ,” he explains . “ That ’ s why we are in favour of the LISA having additional lifetime events . We can imagine a sequence of approved lifetime events whereby people put
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