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Old Mutual Wealth responds to consultation on Lifetime ISA

16/11/2016

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:

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

On a ‘go forward basis’, Quilter oversees £ 111.6 billion in customer investments (as at 31 March 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset and single strategy investment solutions; and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Old Mutual Wealth’s multi-asset investment solutions business.

The Quilter businesses will be re-branded to Quilter over a period of approximately two years following separation from Old Mutual:

  • Intrinsic to Quilter Financial Planning
  • Private Client Advisers to Quilter Private Client Advisers
  • The Multi-Asset business to Quilter Investors
  • The UK Platform to Quilter Wealth Solutions
  • The International business to become Quilter International
  • The Heritage life assurance business to Quilter Life Assurance
  • Quilter Cheviot will retain its name.

On 19 December 2017, Old Mutual Wealth announced that it has agreed to sell its Single Strategy asset management business to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary closing conditions, including regulatory approvals. 

Quilter is part of Old Mutual plc, a FTSE 100 group that provides investment, savings, insurance and banking. For the year ended 31 December 2017, Old Mutual reported an adjusted operating profit before tax of £2.0 billion. For further information on Old Mutual plc and the underlying businesses, please visit the corporate website at www.oldmutualplc.com.

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