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Employers considering LISAs despite pension concerns

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Research conducted by Sackers, the commercial law firm specialising in advising pension schemes, employers and providers, reveals 42 percent of employers already are, or expect to, consider introducing a new Lifetime ISA (LISA) into their remuneration package. 

The introduction of the LISA could mark a turning point in how individuals save during their working life as those who are under 40 will be faced with more choice. Sackers’ research shows the majority of employers (84 percent) want to help employees understand their options by providing financial guidance to help them make the right decisions. However, 95 percent of those polled currently feel prevented from offering direction due to a lack of expertise (20 percent), affordability (34 percent) and the legal risks they might expose themselves to (41 percent). 

The findings highlight that 4 percent of employers are already considering LISAs just one month after their introduction, despite a high proportion (45 percent) of respondents believing LISAs will have a negative impact on pensions and retirement saving, and some 58 percent stating they have no intention of introducing LISAs. Employer guidance will be increasingly important as it is only individuals over the age of 50 with defined contribution (DC) savings that can currently seek guidance from Pension Wise, the free and impartial government service. TPR and FCA intend to publish a joint factsheet in early 2017 setting out the help employers and pension scheme trustees can provide without being subject to additional regulatory requirements, but many currently feel unable to act. 

Lucy Dunbar, senior associate at Sackers, says: “Given that the LISA has only been with us for a month, the proportion of employers who may consider introducing it in the future is high. What would clearly undermine pension savings is if individuals opt-out of their auto-enrolment scheme in favour of a LISA and lose out on valuable employer contributions as a result. Therefore, how LISAs might interact with or complement the current auto-enrolment framework, and ensuring that individuals understand this, will be key. “A likely consequence of the LISA is a greater need for individuals to have access to suitable financial guidance to help them with their savings decisions. The fact that the majority of employers want to offer this guidance is a very positive message, but it is clear the industry needs to do more to break down the barriers to providing clear and effective guidance to pension scheme members.” 

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