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16/11

Old Mutual Wealth responds to consultation on Lifetime ISA

We have issued the following media comment on the release of the FCA paper on the rules for the sale of the Lifetime ISA.

Jon GreerJon Greer, pensions expert at Old Mutual Wealth:

“The Lifetime Isa confuses the long term savings landscape and leaves young people uncertain about where to invest.

“However the view that the exit charge is at odds with the FCA’s charge cap is too simplistic. The exit penalties the FCA were concerned about were those levied by providers and schemes which influence a person’s ability to access pension freedoms. The penalty on the Lifetime Isa is an incentive to use the product for what it was intended for – a house purchase or to be accessed from age 60. The 25% early withdrawal charge shares more in common with unauthorised payment tax charges that apply to pensions, rather than the FCA/DWP charge cap.

“While the exit charge may be aiming to drive the right behaviours, it makes the product complicated and damages the Isa ‘brand’. The Lifetime Isa also appears muddled alongside the government’s successful auto-enrolment strategy.

“It is right that firms should have to remind consumers of the exit charge and any other charges, but that doesn’t get the crux of the problem. The Lifetime Isa needs a rethink.

“The paper introduces a ‘Cash Lisa’. This would potentially need additional consumer warnings as using cash-only for a retirement vehicle is highly unlikely to produce good outcomes over the long term.

“In its current guise, the Lifetime Isa will be used primarily to save towards a first home, very few people will use a Lifetime Isa to save for old-age and pensions are still the best retirement savings vehicle for the majority.

“It is interesting that the paper says personal pensions can be accessed from age 58 rather than age 55. This potentially shows the likely direction of what the government will announce from the State Pension Age review.”

 

 

For more information contact

Tim Skelton-SmithOld Mutual Wealth02380 916 99807824 145 076tim.skelton-smith@omwealth.com

Notes to Editors:

Old Mutual Wealth

Old Mutual Wealth is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

It has an adviser and customer offering spanning:

  • Financial advice delivered by the Intrinsic network in the UK and AAM Advisory in Singapore
  • Platform based wealth management and protection products delivered by Old Mutual Wealth in the UK & Italy* and Old Mutual International globally
  • Asset management solutions delivered by Old Mutual Global Investors
  • Discretionary investment management delivered by Quilter Cheviot.

Old Mutual Wealth oversees £119 billion in customer investments (as at 30 September 2016).

Old Mutual Wealth is part of Old Mutual plc a FTSE 100 group that provides life assurance, asset management, banking and general insurance. Old Mutual is trusted by more than 19.4 million customers across the world and has a total of £342.7 billion assets under management (as at 30 June 2016).

*Old Mutual Wealth announced the sale of Old Mutual Wealth Italy to Ergo Italia on 9 August 2016. The transaction is pending completion.

This press release is for journalists only and should not be relied upon by financial advisers or customers. Investments may fall or rise in value and investors may not get back what they put in.