Adrian Walker, retirement planning manager at Old Mutual Wealth:
“The Lifetime ISA, recently announced by the Chancellor in his Budget, has been seen by many as the prototype for to a full-blown ‘Pension ISA’. But the fact that we appear to have two members of the same party of Government on a collision course over the future direction of pensions taxation states to me that it is now increasingly less likely the prototype will become the final product.
“Making contributions to a Pension ISA, after income tax and National Insurance is taken, would bring forward billions of pounds in tax revenue for the Government but it would also threaten to undermine years of work to improve the image of long term saving through pension schemes via initiatives such as auto-enrolment. The Government’s consultation on pension tax relief was entitled ‘Strengthening the Incentive to Save’, however the Lifetime ISA, as it stands, looks attractive only in the main for anyone under 40 who is saving for a house. Beyond that, apart from tax planning by higher net worth individuals and their families, I cannot see funds saved within an ISA-style environment remaining invested for 20-30 years to fund future retirement income.
“Savers and the pensions industry want to see government make a cross-party commitment to a long-term, sustainable pension saving system. There has been widespread political support for pension freedom reforms that change the way people take pension income, now we need the same certainty in the way we save into those pensions. The Chancellor is believed to be in favour of major reform and that presents something of a sword of Damocles for the industry and for pension savers. While the Pensions Minister has expressed her concern about a pension ISA, we really need the same guidance from the Chancellor to end the current uncertainty.“