The route to retirement: Lifetime ISA could fund majority of retirement if savers invest from a young age

Posted in: Corporate

  • Today’s 18-year olds could fund as much as 83% of their retirement through an investment Lifetime ISA[i]
  • A Lifetime ISA could contribute nearly four times more than the state pension over the course of the average retirement, if people start saving as soon as they are eligible[ii]
  • Government bonuses will fund a full year of estimated retirement spend of £34,000
  • The average OneFamily Lifetime ISA customer is currently saving £75 a month – enough to fund many years of retirement

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, according to research from OneFamily[i].

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). 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.

Nici Audhlam-Gardiner, Managing Director of Lifetime ISAs at OneFamily commented: “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.”

To find out more about OneFamily’s Lifetime ISA visit:

https://www.onefamily.com/lifetime-isa/

[i] 18-40 year olds estimate they need £34,000 a year in retirement income – which equals £578,000 worth of savings based on the average 17 year retirement.  An 18-year-old saving the full available allowance into an investment Lifetime ISA will have saved £482,046 by age 60, based on an assumption of 5% annual growth. £482,046 is 83.3% of £578,000
[ii] An 18-year-old saving the full available allowance into an investment Lifetime ISA will have saved £482,046 by age 60, based on an assumption of 5% annual growth. The State Pension will pay out approximately £145,285.40 over the average retirement of 17 years (£164.35 x 52 weeks x 17 years)
£34,000 x 17 = £578,000
[i] The release uses a combination of OneFamily internal customer data and research conducted by Opinium Research amongst a nationally representative panel of 2,005 UK adults between 6 and 9 October 2017