Workers should be obliged to save for retirement if large numbers opt out of company pension schemes in favour of a rival savings product. That was the warning from the Association of British Insurers (ABI) recently.
This warning centres around Lifetime ISAs (LISAs) which are attractive to the under-40s who wish to save for their own home as well as retirement and who may be tempted away from traditional pensions. More than 6.7 million employees have been automatically enrolled since 2012 and opt-outs are considered to be relatively low at about 10%.
The ABI is concerned that this figure may rise if under-40s start putting their funds into a LISA once it comes into being next April – which can be tempting given they offer a 25% bonus from the state.
If the numbers of auto-enrolment opt-outs increases dramatically, the government may have to make saving for a pension compulsory. Large workplace pensions providers, such as the People’s pension, have even called for the introduction of the LISA to be delayed