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  • April 2016
04

Actuary warns lifetime ISA will 'progressively choke off' pension saving

Open-access content Friday 29th April 2016

Lifetime ISAs ‘sit uncomfortably’ with auto-enrolment, according to the chairman of the Association of Consulting Actuaries (ACA).

2


The proposed savings vehicle, designed for people aged under 40, was first announced by George Osborne in the March Budget statement.

Speaking last night at a pensions industry dinner, David Fairs went on to say: "Do individuals with limited resources put their money into pensions or the lifetime ISA because they probably can't afford to do both?"

Given the option for early access under lifetime ISAs, Fairs said these could become "the savings vehicle of choice" but argued it would not be straightforward because of tax implications, national insurance contributions and employer support.

Fairs warned employees could potentially opt for the lifetime ISA instead of making contributions under auto-enrolment, adding: "As required contributions under auto-enrolment begin to rise, will employees opt instead for a Lifetime ISA? And will that be the right choice?"

The ACA called for changes to auto-enrolment, such as removing the lower earnings deductible and lowering the threshold for auto-enrolment to bring more low-paid workers into the scheme. 

Increasing contribution levels from eight to 16% was another proposal, with contributions rising slowly to avoid increasing opt-outs. 

"Some have said these levels are generally not feasible or amount to over provision for the low paid. Well, they might not be feasible in the short-term, but in the longer-term they have to be if we are not to see growing numbers on minimal state benefits," Fairs argued. 

"And if they do represent over provision for the low paid, I can live with that."

This article appeared in our April 2016 issue of The Actuary .
Click here to view this issue

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2

Workplace ISA should be included in auto-enrolment, says think tank

The Centre for Policy Studies (CPS) proposes the introduction of a workplace ISA to complement the new lifetime ISA, and both should be included in auto-enrolment.
Friday 22nd April 2016
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2

HMRC predicts 300,000 pensioners will sell in secondary annuity market

The HM Revenue & Customs (HMRC) has estimated 300,000 people will choose to sell their annuity under a secondary market, which will be launched in April 2017.
Wednesday 20th April 2016
Open-access content
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Armed forces spouses to get national insurance credit towards state pension

Spouses and civil partners of people who joined the armed forces on an overseas posting will be given a new national insurance credit that counts towards their state pension.
Thursday 7th April 2016
Open-access content
2

As new state pension goes live, 75% of young people set to lose out

The new state pension has come into force today, but three quarters of people in their twenties may lose out on average £19,000 over the course of their retirement, according to the Pensions Policy Institute (PPI).
Wednesday 6th April 2016
Open-access content
2

Lifetime ISA may be right for some but could be distracting, says poll

The new lifetime ISA (LISA) may be suitable for some people but could undermine pension savings, according to Aon Hewitt.
Tuesday 5th April 2016
Open-access content
2

TPR to list group personal pensions open to all employers

The Pensions Regulator (TPR) is to publish a list of group personal pensions (GPPs) open to any employers seeking to comply with their automatic enrolment duties.
Wednesday 27th April 2016
Open-access content
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