"The Department for Work and Pensions rightly outlined concerns about the impact that the Lifetime ISA would have on auto-enrolment, yet the Government’s response to this seems tepid at best."
MPs also recommended a "communication campaign that highlights the differences between the LISA and workplace pensions" and said the government should make it clear that the LISA is not a pension and that for employees who have been automatically enrolled, "any decision to opt-out is likely to result in a worse outcome for their retirement".
In response, the government said it will "undertake an Impact Assessment as part of due process in legislating for the new Lifetime ISA in the autumn".
It added: "Beyond these, the Government does not currently intend to commission new research to predict the impact of the Lifetime ISA on individual behaviour in advance of implementation, but will continue to monitor the success of Automatic Enrolment in terms of workplace pension participation, opt-out rates, and contribution rates."
It said that factual sources of information on the Lifetime ISA will be available on the government website prior to its launch.
It concluded that the "Budget 2016 Lifetime ISA costing, certified by the OBR, did not anticipate any revenue impact from individuals opting-out of their workplace pensions in order to save into Lifetime ISAs".
Gareth Shaw, head of consumer affairs at Saga Investment Services, said: “The Department for Work and Pensions rightly outlined concerns about the impact that the Lifetime ISA would have on auto-enrolment, yet the Government’s response to this seems tepid at best. By refusing to look further at the effect of the Lifetime ISA on auto-enrolment, the Government is making clear that it doesn't see this new savings vehicle as a threat to its flagship pension project.
“Auto enrolment has been largely successful so far, and this should not be undermined by the headline-grabbing Lifetime ISA, which will undoubtedly be very attractive to younger savers. But while the Government says it is not placed to tell people where it should invest their money, it has a duty to encourage good saving behaviour. Saving into a pension, with the addition of upfront tax relief and largely tax-free growth, is one of the most sensible financial steps someone can take, and this should be enthusiastically encouraged.
“We hope the DWP committee to continue to hold the Government’s feet to the fire on this issue.”
