Savers urged to wise up on pensions and LISAs

Leading firm of financial advisers, Newby Castleman (Financial Services) Ltd, is encouraging savers to be cautious when deciding on how best to fund their retirement.

The advice from the Midlands-based firm follows the recent warning from former pensions minister Baroness Ros Altmann that the new Lifetime ISA (‘LISA’) ‘adds complexity’ to saving for retirement and ‘will confuse people.’

The LISA, which is set to launch in April, will be available to savers under the age of 40 and will offer a 25% government bonus on the amount saved, up to a limit of £1,000 per year. Savers can withdraw the funds charge-free and tax-free once they reach the age of 60, or in order to buy a home. Withdrawals made under the age of 60 for any other purpose will incur a 25% penalty.

The scheme is designed to offer a more flexible means of saving money for later life, but Baroness Altmann has voiced concerns that the LISA will be seen by some as an alternative to a workplace pension, and that they may potentially lose out on employer contributions as a result.

She said: “Workers on basic-rate tax mistakenly believe that the 25% Government bonus [on the LISA] is better than 20% tax relief [on a workplace pension]. Of course, they are exactly the same. A 20% grossing up is equivalent to a 25% extra bonus.

Young people I have spoken to - some of whom are on higher-rate tax and have access to a generous workplace pension - have already been attracted to the idea of using a Lifetime ISA instead of a pension. Only when I explain that they will lose their employer’s contribution and higher-rate tax relief do they realise this could be a mistake.”

Proponents of the LISA argue that the scheme is designed to complement workplace pensions and will offer savers more control over their spending in retirement, with tax-free withdrawals for over-60s allowing retirees to access funds as and when needed.

John Freeman, Financial Adviser at Newby Castleman (Financial Services) Ltd, said: “So much has changed over the last few years in terms of how we plan financially for retirement, and the variety of options available to savers has grown significantly in a very short space of time.

This is, for the most part, a positive thing, because having more choice enables us to tailor our savings plans to our own personal needs. Equally though, it also requires us to ensure we are making an informed decision so that we are well provided for later in life. As a result, the need for financial advice is greater than ever.

At Newby Castleman, we have been closely tracking changes to long-term savings schemes from ISAs to pensions, and we assist our clients with finding the best way forward in their circumstances. If you are struggling to identify the right option for you, don’t hesitate to get in touch.”

To find out more about Newby Castleman (Financial Services) Ltd’s advisory services, visit the firm’s website at or email John Freeman at