Access remains key to creating a savings culture amongst young people but monitoring early withdrawal of cash where Isa replaces pension will raise ethical questions that employers will be uncomfortable with, say experts.
Alex Davies, director of Hargreaves Lansdown said his firm had already set up schemes where regular payments were being made into corporate Isa in place of pension.
Responding to the challenge that many employees would simply withdraw cash as soon as it was deposited and spend it, Davihttp://cms.moneymarketing.co.uk/CMS/storyEdit.aspx?storyCode=1021554#es said his firm is able to provide employer clients with reports showing where employees are making very frequent cash withdrawals.
“We can write a member report to say if they are withdrawing money on a regular basis and if they do then the client can have in their contract that they have the right to stop the contributions in the future. There are obviously a lot of legal issues about that,” said Davies.
But advisers questioned the moral right of an employer to determine how much a member of staff could withdraw from their savings. Michael Spink from Aon Consulting said: “Apart from the legal side, the whole ethical dimension of [monitoring staff] feels a bit strange as a kind of empowerment objective.”
Russell Welsh, head of corporate pensions sales at Friends Provident said: “We have young people coming into companies and the question is how to get them saving at all. The reality is they are much more likely to save in a short term arrangement where they can get their hands on it in three to five years time. The idea is they very quickly get used to saving and then in due course they will switch that money into longer term savings.”
Andy Cheseldine, consultant at Lane, Clark and Peacock, said “We are in danger of over-worrying about people putting money in and then taking it back out again. More than 10m people contributed to Isas last year and there is in the order of £220bn in Isas, with more than £160bn of that in cash Isas. People who put money into cash Isas leave it there and put more in the next year and the next year.”