Briefing Note 81 - Lifetime ISAs: pension complement or rival?
The Budget 2016 introduced the Lifetime ISA (LISA) as “a completely new flexible way for the next generation to save”. The LISA provides a complementary savings option to the current pensions system for retirement saving and to the current help to buy ISA for saving towards a first house purchase.
This Briefing Note details the structure of a LISA, compares this with the savings alternatives for house buying and retirement. The LISA is then considered from the viewpoint of the individual saver and potential savings outcomes are modelled under various circumstances. The role of third parties such as employers and trustees are considered before concluding with identifying some outstanding questions and conclusions drawn from the introduction of LISAs.
It concludes that there are uncertainties about the target population, and that LISAs could impact retirement saving if it replaces pension saving.
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Keywords: LISA, Lifetime ISA, savings, alternative, house, help to buy, penalty, property compliment, rival, budget, tax, eet, tee, eligibility, investment returns, withdrawals, contributions,