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Expert calls for 'lifetime' Isas

August 5, 2014

Rupert Jones

Tax-free Isas should be transformed into "lifetime" savings accounts topped up with Treasury cash, a leading pensions expert says.

Michael Johnson, a research fellow at the Centre for Policy Studies thinktank, said the lifetime Isa he was proposing would encourage those now in their 20s and 30s to save for retirement.

A lifetime Isa would be automatically set up when a baby was born, and for every pound saved in the account the Treasury would contribute 50p, up to an annual allowance of pounds 8,000. The incentive of up to pounds 4,000 would be paid to all savers irrespective of their taxpaying status. Any money the saver paid in on top of that, up to a total annual limit of pounds 30,000, would not receive government aid.

The measure would be paid for by scrapping the current system of pension tax relief.

Account holders below the age of 60 who wanted to take money back out of the account would only be able to withdraw their own contributions. There would be no such restrictions on withdrawals made after someone reached 60.

Johnson's recommendations come weeks after Isas were officially relaunched by the government, with savers now able to deposit up to pounds 15,000 a year in cash accounts, stocks and shares, or any combination of the two.

Johnson, who is often consulted on pensions reform by ministers and the Cabinet Office, said the changes that took effect on 1 July did not go far enough.

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Source: Guardian (UK)

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