One of ex-Chancellor George Osborne’s flagship savings schemes, the Lisa is set to launch in April 2017. But with providers calling for a one year delay as they seek clarification on a number of design details, the product’s rollout could be pushed back.
The Lisa will offer those aged between 18 and 40 a Government bonus of 25% on savings up to £4,000 a year. Investors can withdraw funds to purchase a first home worth up to £450,000 or take out all the savings tax-free after reaching age 60.
In the immediate aftermath of its official unveiling by Osborne in the March Budget, the Lisa was fairly positively received. It seemed like a good way of helping younger investors get on the property ladder and its generous bonus was one of the headline sweeteners to emerge from Osborne’s red box of tricks.
But after the Budget Day fog cleared and experts looked beyond the headlines at the fine print it soon became apparent that turning Osborne’s Lisa dream into a reality might be harder than initially thought.
When it comes to the Lisa, the devil is most definitely in the detail. The savings vehicle has attracted negative headlines owing to its complex — and in some cases unknown — design features. Uncertainties remain over whether savers will be able to deposit more than £4,000 a year, make penalty-free withdrawals for events other than house purchases and whether bonus payments will be paid yearly or monthly. Some banks and asset managers argue such uncertainties mean they cannot roll out the product on launch date, now just months away.
Standard Life, citing uncertainties around how the Lisa will be regulated, will reportedly not be offering the product from April, while Aegon remains doubtful as to whether it will be able to do so. And HSBC and Lloyds Banking Group are reportedly unable to confirm whether they will offer it by launch date.
None of which looks very good for the affectionately-named Lisa which is now beginning to lose some of its shine as its creator languishes in the political wilderness. Concerns voiced by high-profile figures, including former pensions ministers Ros Altmann and Steve Webb, have added to the negative sentiment.
Issues with the Lisa run beyond the design domain. A key area of concern is that it will accelerate a shift in the retirement landscape away from pensions and toward Isas. It is worth remembering that the Lisa was announced in a Budget that was widely expected to introduce either a Pension Isa or an overhaul of pension tax relief. While political considerations ultimately put paid to these plans, there was still a feeling that the Lisa merely fired the starting gun for the eventual abolition of pension tax relief or was simply a way of sneaking in the Pension Isa via the back door.
Another concern is that people desperate to buy a first home will focus their energies on saving into a Lisa and sacrifice the benefits of employer contributions and tax relief that come with workplace pensions. Such an unintended consequence would amount to a disastrous own goal.
Other issues with the Lisa are more sociological in nature and revolve around fears it could exacerbate intra-generational inequality. It has been argued the Lisa will disproportionately benefit wealthy 18-40 year olds who are more likely to be in a position where they can use up their pension allowance before putting additional funds into a Lisa.
The issues aired by providers need to be taken especially seriously because if the Lisa is to be a success then providers will have to get on board. While the Treasury is reportedly sticking to its guns over the April launch date, it would do well to heed the concerns of banks and asset managers and adopt a more flexible and pragmatic approach. Delaying launch by a year would help iron out any problems and enable providers to ready their systems. Not delaying it runs the risk of arriving at product launch date without a viable product to launch.
One gets the impression the Lisa was quickly conceived by a Government in need of a headline-grabbing Budget giveaway after making a last minute U-turn on more radical pension reform. The product was perhaps rushed off the Treasury production line without the necessary safety checks and without too much thought given to the underlying nuts and bolts.
The perils of rushing out new Isa products have been brought into sharp focus by the travails facing the Lisa’s Isa cousin — the Help to Buy Isa. It recently emerged that a little-known restriction in the small print of the Help to Buy Isa scheme means first-time buyers will not be able to use the product for an initial deposit because the 25% bonus is only paid upon completion of a property sale. This has provoked a fierce backlash from consumers and experts alike in what is an embarrassing episode for the Treasury.
Lessons must be learnt from the example of the Help to Buy Isa — or else the Isa family name is at risk of being seriously tarnished. And perhaps the major lesson is that of not pumping out products before they are fit for purpose. And not constantly reinventing and complicating the Isa — a product that was initially a well understood and effective savings vehicle.
So calls for short-term life events such as critical illness, redundancy or children’s education to be added to the Lisa as additional lifetime events should be dismissed — for now — because this will only add new layers of complexity. And perhaps a more simple and straightforward Lisa model should be launched initially so some of the uncertainties around the fuller version can be properly addressed.
But ultimately, the problems that have beset both the Help to Buy and Lifetime Isa suggest the Isa reinvention process has run its course. Such constant meddling and rebranding introduces the very real risk of product fatigue and consumer disengagement. And that would be a sorry ending for a savings product that initially served a very good purpose. unshaven girl займ на карту с открытой просрочкойзайм без трудоустройствазайм под залог недвижимости кемерово