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Over four in 10 (43 per cent) young people have indicated that they would use a lifetime ISA (LISA) for retirement planning, Hargreaves Lansdown (HL) has found.
The survey found that 27 per cent of people aged 18-34 said they would use a LISA alongside a pension for their retirement planning, with a further 15 per cent saying they would use a LISA instead of a pension.
Just 10 per cent in this age group said that LISAs would not be the right option for them. However, one in five (20 per cent) said they were unsure, with a further 20 per cent saying they didn’t know what a LISA was.
HL’s head of retirement, Helen Morrissey, said: “The LISA has the potential to really help people boost their retirement planning with just over 40 per cent of 18-34 years saying they have a place in their retirement planning.
"The 25 per cent bonus on contributions up to £4,000 per year can help you build a hefty sum over time, so it’s a great vehicle to use for savings alongside your workplace pension (where you also benefit from an employer contribution).
“For groups such as the self-employed, who don’t benefit from workplace pensions, LISAs can help them build up a retirement pot that they can access early in case of emergencies subject to a 25 per cent penalty.
"This is particularly the case for those paying basic rate tax as the 25 per cent bonus acts in a similar way to basic rate tax relief in a pension – and the income is all tax-free.
“Higher rate taxpayers are usually better off in a pension where they can get 40 per cent or even 45 per cent tax relief on their contributions.
“However, there are challenges. Awareness of LISAs is still too low, with one in five 18- to 34-year-olds saying they don’t know what a LISA is. When we look across all age groups, the number swells to one in four (24 per cent). This means there are people out there who could really benefit from a LISA who don’t know what one is.”
Currently, you can’t open a LISA if you are over the age of 40. HL has called on the government to allow people up to the age of 55 to be able to open and contribute to LISAs.
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