Aegon urges government to keep LISA simple

The Lifetime ISA allows under 40s to save for either a first house deposit or retirement. Contributions of up to £4000 each year will receive a 25% Government bonus, although this plus an additional 5% will be reclaimed if savings are used other than for house purchase or from age 60 for retirement.

The Government has consulted on whether or not to allow higher contributions to be paid in without the bonus, if individuals should be offered a facility to ’borrow’ from their fund without losing the bonus if repaid within a given time-period, or if exit penalties should be waived if withdrawals are for other ‘life events’ such as requiring care or being made redundant.

TISA, the financial services membership association, believes that the Government should expand the scope of the new LISA to allow early access for additional lifetime events such as critical illness or redundancy.

However Aegon has raised concerns that until the government has finalised details, the FCA can't begin to consult on regulation of the product and the way it is sold, and only then will prospective providers have the information needed to finalise their product offerings.

Steven Cameron, Pensions Director at Aegon, said: “The Government is running out of time to announce key features of the new Lifetime ISA if it is to be up and running from next April. The likely strong demand for LISA means despite the focus on Brexit, we expect the Chancellor will want to see his key Budget proposal put into practice, for the benefit of savers under age 40.

“The Government is considering additional features such as borrowing facilities, wider penalty free withdrawal options or allowing contributions above £4000 but without the bonus. We’ve always felt these would make the product much more complex for savers and providers alike without boosting its appeal. More than ever, as it prepares for Brexit, the key message we’d send to Government is ‘Keep LISA simple’."