Posts

The Lifetime ISA

Announced in the March 2016 Budget the Lifetime ISA (LISA) can be opened by savers between 18 and 40. Up to £4,000 a year can be saved up to age 50. A 25% government top up will be added to a maximum of £1,000 a year. The money saved can go towards a first home or saved until age 60 to help to fund retirement. Contributions sit within the £20,000 ISA limit for 2016/17.

The government bonus of 25% is lost if withdrawals are made before age 60 other than to buy a first home.

The LISA is a useful addition to the investment world although pensions can still have advantages of upfront tax relief and, in some cases, employer contributions.

Annuities – Time for Reform

The FSCP also finds that “annuities are increasingly complex and may not offer good value for money”. For many people this is not really news but still far too many individuals buy an annuity from their pension provider without taking independent advice.

Who in their right mind would buy a product which must last a lifetime and cannot be changed without taking a huge amount of care? Comparison websites are criticised for being confusing, having a lack of clarity about charges and not describing the additional protection that consumers buying with advice would get over those buying without advice.

The FSCP recommends that consumers have access to full, fee based, regulated, whole of market advice and recognises that for those with smaller pension pots this can appear an expensive service.

We agree wholly with these conclusions and would also emphasise that this advice should also cover a full appraisal of alternative methods of drawing pension income including income drawdown. Annuities are no longer compulsory and individuals must fully explore all income options before making irrevocable decisions that will have a lifetime effect on their wealth.