“There is a real risk of a ‘mis-buying’ scandal as the wrong people take out Lifetime ISAs. For example:
• “There should be a presumption against taking out a LISA for those who are not taking full advantage of the matching workplace pension contributions on offer from their employer; for example, a worker who puts £1 into a LISA would get 25p in top-up from the Government compared with a £1 contribution from an employer who was prepared to ‘match’ employee pension contributions.
• “Young people who invest in a pension can take a long-term perspective and benefit from investing in higher risk assets; there is a real danger that those who take out a LISA will invest in cash, perhaps for a decade or more; a combination of low interest rates and rising inflation could make this a very poor savings strategy;
• “The government has suggested that LISAs would be suitable for the self-employed because of the ability to withdraw cash, but the hefty exit penalty means self-employed people should not take out a LISA with a view to treating it like an easy-access savings account.
• “People who have already bought a house should think very carefully before opening a LISA as a ‘retirement only’ product; with no contributions allowed after age fifty and a lock-in of cash until age sixty, there are serious questions about the suitability of the LISA for this group;
“The LISA complicates the savings market and means that younger people who may not have access to financial advice will face difficult choices between staying in a workplace pension or opting for a Lifetime ISA. It is vital that Government and regulators put in place a strong regulatory regime to prevent people from taking out an unsuitable product.”
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