The Lifetime ISA (LISA) is a complicated product that could potentially lead to misbuying or misselling, argues Baroness Ros Altmann in this special Professional Adviser video roundtable discussion.
The former pensions minister (pictured above left) was one of a trio of retirement saving experts invited by Professional Adviser to come together in a special edition of its Adviser Champions video series to butt heads and occasionally agree about the prospects for LISA.
Joining Altmann to thrash out the merits and shortcomings of the newly available savings product were Dunstan Thomas director of policy Adrian Boulding and AJ Bell senior analyst Tom Selby (respectively third from left and far right), with the session chaired by Professional Adviser editor Julian Marr.
On the question of whether the LISA was too complicated for young people to understand, Altmann - who recently described the product as "a fudge dreamed up in the last days of the pension tax consultation" - did not hold back.
"It's a product that is complicated for anyone to understand," she said: "My fear with this product is it will either lead to misbuying or potentially misselling - and we don't need another scandal of that kind in the financial industry."
She added: "The beauty of ISAs normally is that they should be simple so you can save easily and transparently."
Selby, however, countered: "Another way to look at it would be that the pensions industry has probably been quite bad at explaining the benfits of saving into a pension.
"It is a communications challenge and I think we can come at it from a more positive perspective and say - let's think about the way we explain the benefits of pensions rather than saying the way the LISA works is poor."
The LISA was launched in April 2017 to help those aged under 40 to save either for their retirement or a home purchase. Savers can contribute up to £4,000 a year, with the government providing a 25% bonus on those savings.
If, however, a saver decides to withdraw funds from their LISA for a purpose other than purchasing a house or retirement, they will incur a 25% withdrawal charge on the total savings in the account.
Altmann also felt that, if the LISA were to take off, it could be "a significant threat to pensions". She argued it should be changed to become exclusively a house-purchase product, keeping retirement separate.
Selby agreed the LISA was a good option for first-time buyers but, as long as providers marketed it correctly, he added, it could also work well for a lot of people as a complementary product alongside more traditional retirement offerings.
Both Selby and Boulding expressed confidence the LISA would catch on and that the numbers of businesses moving into the space - of whom AJ Bell has expressed an intention to be one - were likely to "snowball" over the course of the year.
Writing for Professional Adviser, Boulding has noted the lukewarm welcome many potential providers have offered the LISA is at odds with the more positive reaction of "almost all the millennials" recorded in a recent survey by Dunstan Thomas.
He has also become increasingly convinced there is room for both pensions and the LISA to flourish in the long-term savings market.
To see the full set of Adviser Champions videos to date, please click here
If you would like to put your own or a colleague's name forward for consideration to take part in the series, please do email Julian Marr
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