Consider the lilies – and leave LISA to George

More than a third (38%) of respondents are likely to consider introducing the newlifetime individual savings account (Isa) into their employee remuneration scheme in the future, according to research by law firm Sackers.

The survey of 78 employers, trustees and advisors also found that 84% of respondents want to offer more financial guidance and education support to help employees with the decision making process around pensions.

So reported Employee Benefits Magazine.yesterday.


Just how complicated can we make saving for retirement?

For most people (other than lawyers), a pension is something you save into so you have enough money to stop working, it’s an insurance against living too long and not being able to work for ever, it may even – for some – be a luxury item, a means of getting richer through the use of tax-breaks.

In order to make pensions happen we have had simple pension plans which deliver a proportion of your earnings to you after you stop earning as a defined benefit. When we screwed up the delivery of defined benefit , we moved to a similar system where the benefit delivered was a pot of money which you could spend as you liked. We decided to use work as the place to organise all this and payroll as the delivery mechanism.

Somewhere along the line we worked out that the tax treatment of all these payroll driven benefits needed to change and a year and a half ago the Government announced it was reviewing how much tax we’d pay on the contributions we and our employers made towards our retirement. Instead of implementing the proposals laid out in the 2015 budget, the Treasury went off at a tangent and introduced the Lifetime ISA.

Somewhere along the line, the Lifetime ISA has moved from being a savings scheme to help buy a house and – if there’s anything left over – top up the pension pot, to a workplace ISA to be offered as an employee benefit.


One for the lawyers and consultants

Let’s be clear,  the workplace pension is the way most of us save for retirement, those who don’t have either opted out of employment or opted out of workplace pensions and they are a small minority of the working population. They are getting smaller, each month that the auto-enrolment juggernaut moves on.

People like auto-enrolment because- though they have no clue where their money goes- they save automatically  – resistance seems futile!

The greatest challenge facing auto-enrolment, certainly for employers who can afford to engage Sackers as their pension solicitor, is the need for more money into workplace pensions.

Which begs the question, why are employers getting their knickers in the twist over a product that doesn’t exist (LISA), let alone a workplace version of a product that doesn’t exist?

Here are the remarkably uninteresting results of the poll (of 78 employers)

  • 4% of respondents are already considering offering lifetime Isas within their staff remuneration package.
  • More than half (58%) of respondents have no plans to include the lifetime Isa within their benefits package.
  • 45% of respondents believe the lifetime Isa will have a negative impact on pensions and retirement saving.
  • 95% of respondents feel prevented from offering financial guidance and education.
  • 20% of respondents feel they lack the expertise to offer financial guidance, and 41% are worried about the legal risks of doing so.

There are many things in life to worry about…

George Osborne, the architect of LISA and tormentor in chief of the pensions industry is currently enjoying a well earned spell in the dog-house.

He has had his chance to put pension taxation on a proper footing but he bottled it in favour of winning a referendum which he managed to lose.

Having convinced himself he had the common touch with “pension freedoms”, he and his Treasury had been conniving to blow away what was left of the P in the DWP with a suite of ISAs that would pave the way for George’s  coronation of Prime Minister in 202o.

For George Osborne, there are many things to worry about, most of them to do with his career, I doubt that he is losing much sleep right now about having totally lost the plot on pension taxation reform.


Workplace ISAs should not be one of them

We need to make auto-enrolment a success and complete part one of the project – so we’re all in.

We need to auto-escalate to 3+5 and then get to proper levels of retirement saving so that we can start looking forward to retirement again.

We need to sort out the cross-subsidies in taxation that make pension saving a lot more rewarding for high-earners.

We need to stop messing about (and publishing unrepresentative surveys) about workplace ISAs.


Consider the lilies

I am on a boat, there are no lilies in the mill pond, but there is a swan. The swan swims around all day in a contented way, he gets on with being a swan. I imagine if they’d had swans in Palestine, Jesus would have asked us to consider swans , but either will do.

We really need to keep our jobs simple. People want simple ways to save for retirement and if we have financial education at work, it should be focussed on simple messages like “save more”, “save efficiently” and keep “consider the lilies”, thankfully – you don’t need a pension lawyer to do that.

 

 

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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