Government reveals LISA details but industry may not be ready
Pension professionals have welcomed the government's decision to keep the lifetime ISA (LISA) simple after a bill containing details of the saving vehicle was published.
The Savings (Government Contributions) Bill, introduced in the House of Commons on 6 September, indicates the government remains committed to introducing the tax-efficient account for its planned April 2017 launch date.
However, there remain concerns some providers may not be ready in time for the launch due to a further delay in providing specific details on the policy.
The LISA, which was announced by former chancellor George Osborne in the 2016 Budget, was originally planned to allow people under the age of 40 to save up to £4,000, then benefitting from a 25% top-up from the government.
However, the bill neglects to include some of these details. Although it refers to a maximum contribution limit, an age limit, and a government bonus, it does not provide any firm details.
It does confirm savers will only be able to withdraw from the account, without incurring penalties, in order to fund their first home, to fund retirement after age 60, or due to terminal illness or death.
There had been concerns LISA would be delayed or made more complex, but the publication of the bill has somewhat eased these worries.
Hargreaves Lansdown head of retirement policy Tom McPhail said keeping LISA simple would avoid extra costs to users.
"We are pleased that the government has chosen to keep the product as simple as possible, with penalty free withdrawals limited to first house purchase, withdrawals after age 60, and terminal illness. More complexity would only have added to the costs paid by investors."
However, providers are still warning they may not be able to provide the product as early as April 2017.
Aegon pensions director Steven Cameron warned it might be challenging.
He said: "Unless the details are all clear and available, it's very difficult to confirm whether it's going to be possible to launch by next April.
"As things stand, what has been helpful is the Treasury has kept things simple. This does help avoid complicating the product design both for the manufacturer but also for the end customer.
"While the bill gives helpful clarification, final details are still awaited and we don't expect these until the committee stage, which is likely to be late October or early November. That only leaves five months to sort out all the details.
"What we will need to do is review what's feasible by next April. We can't confirm whether or not we will be able to launch in April. The sooner we get all the remaining details the better."
A Treasury spokesperson confirmed to PP there is no firm timetable for the bill yet, but further progress is unlikely to be made until early October, after the conference recess.
Lane, Clark and Peacock partner Andrew Cheseldine added: "The LISA will be a much needed addition to the savings market, although success is dependent on how many providers are available and how competitive the market will be - currently most are not expected to be ready by April 2017.
"The key details such as authorisation process and definitions of a ‘first-time residential purchase' will have a significant impact on the LISA and aren't expected for some time. For now, it's just a waiting game."
The LISA has been the subject of much criticism since its announcement, with industry figures voicing concerns it may encourage younger savers opt out of workplace pensions.
Shortly after her resignation in July, former pensions minister Baroness Ros Altmann said it was a "Trojan horse" that would "destroy pensions".
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