34% of young employees prefer LISA to a pension

Over a third, 34 per cent, of younger employees would prefer to save into a Lifetime ISA than a pension, Capita Employee Benefits has reported.

In its annual Employee Insight Report, Capita revealed that employees aged between 16 and 34 would rather save into an ISA for retirement than a pension. Fifteen per cent of young employees opposed this.

The LISA, which was announced in March 2016 and will be launched in April next year, received a largely positive response from young workers. Sixty per cent of 16 to 34 year olds believe that the LISA will have a positive impact, whereas 8 per cent disagreed.

However, 32 per cent said that they are unsure of the impact the LISA will have, which suggests more information is needed.

When asked to make a straight choice between a pension and a LISA, most young people said they would stick with a pension.

Nonetheless, 38 per cent of 16 to 34 year olds noted that if they could access their pension more flexibly, they would be willing to give up the pension contribution from their employer. Forty two per cent said they would not.

Furthermore, the study also found an improved trust in the pensions industry. Thirty nine per cent of employees said that they did not trust the industry, in comparison to 43 per cent in 2015 and 47 per cent in 2014.

Among the participants, there was a significant lack of knowledge and confusion towards pension savings overall. Forty nine per cent of employees find pensions-related terminology confusing and complicated and 51 per cent are unaware how much they should be realistically saving for retirement.

A further 60 per cent felt that their employer should provide access to financial education and retirement planning.

Capita Employee Benefits head of DC proposition & strategy Anish Rav, said: “The annual Employee Insight Report has again provided a valuable insight into today’s workforce and their views on pensions and retirement.

“It’s easy to see how LISA could become popular, but it’s crucial that younger employees properly evaluate just what they will be giving up if they do decide to stop saving into their pension to redirect into a LISA.

“While the research reveals growing trust in the pensions industry, it is also clear employers need to be doing as much as possible to explain and communicate the options their employees have at their disposal.”

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