The brains behind the Lifetime ISA (LISA) has defended his controversial Workplace ISA proposal, following concerns that it risks further confusing consumer (Lifetime ISA Bristol).
Michael Johnson, research fellow at the Centre for Policy Studies, was probed by MPs on the Work and Pension Select Committee last week about his recommendation that an Workplace ISA should be installed to “sit inside” the recently announced LISA.
“It is early days, but I envisage that we compliment the Lifetime ISA with a workplace ISA”, Mr Johnson said, meaning individuals could have a single savings vehicle “to servce from cradle to grave”.
Last week, insurance giant Aegon urged the government to give LISA a test run before introducing the costly add-ons proposed by Mr Johnson.
During the session, which was held in front of MPs, Mr Johnson was asked whether this risks giving the public mixed messages, particually in light of the auto-enrolment regime launched in 2012. But Mr Johnson denied this and said he had no wish to hinder the success of A.E.
“The Lifetime ISA is not to replace the pensions world, it is an alternative. It is for the individual to choose if they want a pension or an ISA”.
He pointed out that employer contributions for AE will ramp up in 2018, meaning “it is vital that the workplace ISA is in place to discourage opt-outs”.
This comes after pensions minister Baroness Ros Altmann recently admitted that constant changes to the UK pension regime has left savers “baffled and bewildered”.
One point of contention was over the tax structure of the LISA, with Mr Johnson stating it comes under the exempt-exempt-exempt (EEE) model for basic-rate taxpayers.
“It’s vital that we disentangle the Lifetime ISA with tax-exempt-exempt (TEE), I have never proposed TEE,” he stated.
However, Tory MP Richard Graham queried whether this assertion was misleading, given the £4,000 a year that can be paid into the LISA comes out of taxed income.
(FTadviser, May, 2016)
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