Industry professionals and the general public want critical illness and redundancy included in the Lifetime ISA
TISA, the financial services membership association, has today released the results of a survey which reveals critical illness and redundancy as the top choices that should be included as additional lifetime events in the Lifetime ISA (LISA) for penalty free withdrawal. TISA believes that the Government should expand the scope of the new LISA to allow early access for an enhanced list of life events. The results will be proposed to the Government for future implementation.
The survey*, completed by 223 industry professionals and members of the public, highlights that in addition to the current withdrawal criteria (lifetime events of house purchase for first-time buyers, terminal illness and retirement at 60 years), both critical illness (69 per cent) and redundancy (52 per cent) should be eligible for early access and benefit from the Government bonus. Significantly, industry professionals and the general public are in agreement that these are the top lifetime events that should be included.
However, there is a split message among both groups on the third lifetime event that should be included. The general public believes that moving to a bigger home is important. This builds on the success of the Help to Buy: ISA, which sold 370,000 plans in the first four months. Interestingly, professionals are opposed to adding further lifetime events, citing the danger of overcomplicating the LISA and burdens on the sales and administration process.
The Lifetime ISA (LISA) was announced by the Chancellor in the last Budget and will be launched in April 2017. LISAs will allow anyone aged 40 and under to put money into an ISA before they are 50, and those using this savings vehicle will receive an added 25% bonus from the Government. Individuals will be able to save up to £4,000 each year, and receive a bonus from the Government, which is capped at a maximum of £1,000 a year.
However, those wishing to withdraw their savings before they turn 60 for uses other than house purchase and terminal illness which HMT is already making available, will lose the Government bonus (and any interest or growth on this), and will also have to pay a 5% charge.
Other findings show parent’s nursing care fees, getting married, funeral costs for relatives and children’s education were amongst other choices hoped to be included as additional lifetime events in the LISA for penalty free withdrawal, though they proved significantly less popular amongst the general public and industry alike.
Adrian Boulding, TISA Policy Strategy Director, said:
“The survey clearly shows that both professionals and the general public agree that critical illness and redundancy should be included in the additional lifetime events. Interestingly, whilst the general public want moving to a bigger home to be included as the third lifetime event, professionals worry that it would make the LISA too complicated.
“We believe that people need more short-term incentives to save. People will typically make sacrifices up to about five years, beyond five years it is harder for human beings to plan for lifetime events. That’s why we are in favour of the LISA having additional lifetime events. We can imagine a sequence of approved lifetime events whereby people put money into the LISA, save up for the next lifetime event, for example, getting married, moving to a big home, withdrawing some of the money for that lifetime event and then continuing to save again.
“Based on the responses, we see this as a great opportunity for the Government to provide people with greater choice and flexibility. We are pleased with the responses from the survey and we will continue to work closely with the Government, industry and trade bodies in the consultation around the policy.”
*TISA conducted a survey with 223 industry professionals and the general public asking to have their say on which additional lifetime events should be included in the Lifetime ISA (LISA) to allow for a penalty free withdrawal in May / June 2016.
For further information please contact:
Alistair Kellie – Telephone: 020 7680 6558/Email Alistair.Kellie@newgatecomms.com
Sara Neidle – Telephone: 020 7680 6550/Email Sara.Neidle@newgatecomms.com
Jessica Hodson Walker- Telephone 020 7680 6538/EmailJessica.HodsonWalker@newgatecomms.com
Email: TISA@newgatecomms.com
Notes for Editors
TISA is a not-for-profit membership association operating within the financial services industry. The focus of our recommendations and actions is improved outcomes for consumers and UK plc with this approach leading to a stronger UK financial services industry.
TISA’s growing membership comprises over 150 firms involved in the supply and distribution of savings and investment products and services. These members represent many different sectors of the financial services industry, including asset managers, insurance companies, fund managers, distributors, building societies, investment managers, third party administrators, consultants and advisers, software providers, financial advisers, pension providers, banks and stockbrokers.
TISA has a successful track record in working cooperatively with government, regulators, HMT, DWP and HMRC to improve the performance of the industry and the outcomes for the public. Effective policy and regulation and the creation of efficient industry infrastructure continues to be the major focus for our members. TISA is unique in that it represents the entire financial services industry, incorporating cross-sector policy, industry and technical expertise. Whilst we maintain a solid partnership with government, the regulators and wider industry, we remain independent and develop neutral views and opinions. This impartiality is reflected in our ability to drive development projects which improve industry performance and consumer outcomes, putting us in the unique position of being able to constantly challenge the status quo to bring about material improvement.