Including the Lifetime ISA in the national workplace pension scheme could more than double employees' savings, according to True Potential Investor.
Figures show that on average savers contributed £6,064 to ISAs in 2014/15 compared to £2,840 for personal pensions. True Potential says this is proof that on a level playing field, savers voluntarily put more into an ISA than a pension.
The LISA will be available from 2017 with a 25% government top-up, equivalent to basic rate pensions tax relief. But so far there are no plans to make it available under AE.
The Government plans to increase auto-enrolment contributions from 1% to 8% by 2019, but is fearful of sparking a surge in those choosing to opt out. Approximately 10% of employees currently choose not to take part in AE.
True Potential Investor Managing Partner, David Harrison, said:
“Auto-enrolment is successfully overcoming the inertia that prevents people from saving for retirement but it would be a mistake to ignore the behavioural evidence and exclude the Lifetime ISA. Workplace pensions benefit from employer contributions so the LISA will be at best complementary for those who can afford to have both products under the existing proposals.
“Almost £80bn was saved into ISAs last year compared to £20bn in personal pensions so it is clear that on a level playing field, ISAs win. Adding the LISA to auto-enrolment could help reach the Government’s aim of raising contributions without increasing opt outs because the public is already there with ISAs.
“The Lifetime ISA inside auto-enrolment is a win win, but the pensions industry will attempt to strangle it at birth. The Government should give its policy the greatest chance of succeeding by including it in auto-enrolment from next year.”