Savers could be more than £34,000 better off with the new Lifetime ISA compared with a pension, True Potential Investor has claimed.
Involving surveys of more than 18,000 people over there years, the study by the online investment site showed that, on already put 38 per cent more into their ISA than their pensions.
Figures suggested savers aged 18 to 40 set aside an average £186 each month for their pension. By comparison, they make an average monthly savings into their ISA of £257. Until the Budget announcement, pensions tax relief and employer pension contributions cancelled out the difference between pensions and ISAs.
But the introduction of the Lifetime ISA, and its 25 per cent bonus added by the government, means the savers under 40 could be sitting on a Lifetime ISA worth £123,360 by the time they reach 50.
Their pension fund, based on current savings trends, would be worth £89,280 including basic rate tax relief, increasing to £111,360 after including employer contributions at 3 per cent of the average workplace salary.
David Harrison, managing partner at True Potential Investor, said “The pensions industry is queuing up to say the Lifetime ISA is bad news and will confuse people, which is both highly ironic and wrong.
“The fact remains that savers voluntarily put more money into their ISA each month compared with their pension”.
Industry figures have criticised the newly announced Lifetime ISA, which offers a 25 per cent government bonus to help people under the age of 40 save for retirement or to buy their first home, but otherwise has a hefty early exit fee of 5 per cent.
(FTadviser, March 2016, Ruth Gillbe)
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