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    So have just read up on the lifetime ISA, but two burning questions I have which makes me think it's a bit too good to be 100% true are:

    1) What is going to happen to the state pension? it seesm like the Lifetime ISA is eventually going to replace the state pension

    2) Where is the government going to be getting this money to pay the 25% bonus? (I assume if they phase out the state pension, then part of the money will come from that)
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    (Original post by Gucci Mane.)
    So have just read up on the lifetime ISA, but two burning questions I have which makes me think it's a bit too good to be 100% true are:

    1) What is going to happen to the state pension? it seesm like the Lifetime ISA is eventually going to replace the state pension

    2) Where is the government going to be getting this money to pay the 25% bonus? (I assume if they phase out the state pension, then part of the money will come from that)
    Government (of all coulors) has begun to recognize that the state pension is pretty unsustainable in the long run without exceptionally high immigration or fertility rates and so what they are doing with the workplace pension scheme and lifetime ISA is to essentially have people accumulate private pensions so that they either don't qualify for the means tested state pension or can scrap the triple lock and raise it at a much slower rate because people won't need as much help from government.

    This will come out of the government budget like most other stuff so it's paid for by taxation.
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    (Original post by Rakas21)
    Government (of all coulors) has begun to recognize that the state pension is pretty unsustainable in the long run without exceptionally high immigration or fertility rates and so what they are doing with the workplace pension scheme and lifetime ISA is to essentially have people accumulate private pensions so that they either don't qualify for the means tested state pension or can scrap the triple lock and raise it at a much slower rate because people won't need as much help from government.

    This will come out of the government budget like most other stuff so it's paid for by taxation.
    Thank you, that's very helpful.

    I thought it would eventually mean scrapping the state pension or as you mentioned reducing the number of people who are eligible for it.

    I guess the question now is, if the new ISA schemes (Lifetime & Help to Buy) are going to mean tax rates are set to increase in future.
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    (Original post by Gucci Mane.)
    Thank you, that's very helpful.

    I thought it would eventually mean scrapping the state pension or as you mentioned reducing the number of people who are eligible for it.

    I guess the question now is, if the new ISA schemes (Lifetime & Help to Buy) are going to mean tax rates are set to increase in future.
    Yeah. Means testing will just get ever tighter although they'll probably have to keep a state pension for the disabled ect..

    All things being equal then yes but the Tories are quite happy to cut spending elsewhere.
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    (Original post by Gucci Mane.)
    So have just read up on the lifetime ISA, but two burning questions I have which makes me think it's a bit too good to be 100% true are:

    1) What is going to happen to the state pension? it seesm like the Lifetime ISA is eventually going to replace the state pension

    2) Where is the government going to be getting this money to pay the 25% bonus? (I assume if they phase out the state pension, then part of the money will come from that)
    A lot of people on sites like Monevator see it as a precursor for a "Pension ISA" reform that Osborne was forced to shelve. I'm inclined to think so too.

    It comes from government spending.
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    (Original post by Gucci Mane.)
    I thought it would eventually mean scrapping the state pension or as you mentioned reducing the number of people who are eligible for it.
    Personally I don't see the Lifetime ISA as a threat to the state pension - whilst I'm sure there's ample scope for reform of the existing state pension system, it's ultimately a safety net for pensioners who have failed to save during their lives, and in that end it's not going to be "replaced" by a savings scheme.

    Like The Financier says, it seems more likely that a similar ISA will replace private and employer pensions as a tax wrapper. The main advantage of this is to the Government: existing pensions are taxed only when the pensioner reaches pensionable age and withdraws funds from them. Lifetime ISAs are taxed at the time that they are earned. This means that the Government benefits from their taxable income now rather than in 30 years.

    Removing higher rate tax relief on pensions also feels inevitable, and they'd likely be bundled into a single reform.
 
 
 
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