Stewart Hastie, Pensions Partner, KPMG, comments on the creation of a Lifetime ISA:
“The Lifetime ISA announced today is ultimately a testing ground for the Pensions ISA proposed before the budget. It gives the Government the option to see how consumers react to the ISA option.
“Giving consumers more choice that encourages long-term saving is a welcomed move but working out if you will be better off in your existing pension or in a lifetime ISA isn’t straightforward. Those who stand to benefit most are those paying basic rate tax before and after retirement. Interestingly, this could also be an attractive saving option for anyone under forty exceeding, or expecting to exceed, the new tapered annual allowance.
“The flexibilities to withdraw the cash early could be attractive to many but it means losing the Government bonus and a further 5%. There’s also a risk that this could result in higher opt-out rates under auto-enrolment and ultimately resulting in less money in UK long term savings.”
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