Lifetime ISA could fund majority of retirement if savers invest from a young age
A lifetime ISA could contribute as much as 83% of the required retirement savings of today’s young adults (£578,000) if they start taking advantage of their allowance as soon as they are eligible, OneFamily has found.
An 18-year-old saving the full allowance towards their retirement could save £482,046 by age 60, based on an assumed 5% annual growth from an investment Lifetime ISA.
This is nearly four times more than most people will see from state pension pay-outs, based on an average 17-year retirement (£145,285).
Nici Audhlam-Gardiner, managing director of Lifetime ISAs at OneFamily, said: “Whatever your personal goals for retirement, it’s important to plan ahead to make sure you have adequate savings.
“Private and workplace pensions are a great way to save for retirement, however these alone might not meet the expectations of today’s young people, or may not be available for those who are self-employed.
“It’s important to consider other forms of retirement saving, such as a Lifetime ISA, to ensure you have enough set aside to reach your goals.
“Saving little and often from a young age can have a huge impact, particularly when anything you put aside will benefit from a government bonus with a Lifetime ISA.”
In government bonuses alone, they would earn £32,000 – which accounts for nearly a whole year’s worth of income based on the retirement expectations of people aged 18-34 (£34,000).
The need for additional forms of retirement saving, like the Lifetime ISA, are clear as 40% of today’s millennials don’t believe a pension alone will be enough to meet their expectations. Nearly 70% of OneFamily Lifetime ISA customers are using it for retirement savings.
A popular retirement goal of younger people is to travel in their later years (47%). The average monthly payment into a OneFamily lifetime ISA being used for retirement is £75.
If a saver takes a lifetime ISA at age 30 and continues to invest every month by the time they reach 60, they will generate £51,921, more than enough to fund many holidays during their later years.