The features of a proposed ‘Workplace ISA’ have today been published by its think tank creator, including the option for employers and employees to contribute £10,000 annually into the savings pot.

The Centre for Policy Studies has revealed a number of proposed details for the new vehicle that it claims would sit alongside the new Lifetime ISA, forming part of the auto-enrolment process.

Last week in a committee meeting with the Department for Work and Pensions, CPS research fellow Michael Johnson said the new ISA would not affect the success of auto-enrolment and would merely be “an alternative” to the traditional pension.

He also claimed the Workplace ISA would actually discourage opt-out rates by expanding the current auto-enrolment framework.

But former Pensions Minister Steve Webb has today criticised the proposal on Twitter, arguing more pension products are not necessary to enhance savings:

.@JosephineCumbo because new alternatives in the workplace for 6 million newly enrolled workers is clearly the top priority ...

— Steve Webb (@stevewebb1) April 22, 2016

Among the key features of the Workplace ISA, the CPS said withdrawals would not be permitted until the age of 60; thereafter they would be tax-free.

Additionally, both employer and employee contributions would share an annual contributions cap of £10,000, subject to Treasury cost modelling.

As per the Lifetime ISA, employer contributions would be taxed at the employee’s marginal rate and may be paid into a Workplace ISA until the age of 50. It would be accompanied by the same 25 per cent Treasury bonus as that intended for the Lifetime ISA.

Furthermore, auto-enrolled employee contributions would be able to be paid directly into the employee’s Lifetime ISA. They would be subject to tax, withdrawal and penalty rules as other Lifetime ISA savings.

The CPS has suggested the Workplace ISA could be “housed” within the Lifetime ISA, leaving the individual with a single retirement savings vehicle.

It also said Workplace ISA assets should enjoy the same inheritance tax treatment as today’s pension pots and should be excluded from means testing purposes, as per today’s pension assets.

Commenting on the proposal, Johnson said LISAs and Workplace ISAs working together within the auto-enrolment framework would “help many people of modest means achieve a goal that was originally proposed in a 2012 paper aimed at catalysing the broad-based savings culture that the UK so desperately needs”.

“The majority of the population should be encouraged to set themselves one simple goal at the point of retirement: to be a debt-free home owner (including no consumer debt). Thereafter, they could perhaps downsize to top-up their retirement income, and perhaps finance long-term care.”

Johnson added that ideally, the Workplace ISA will be announced in the 2016 Autumn Statement, “perhaps for 2018 implementation.

“It would, of course, compete with today’s occupational pensions savings schemes,” he said.

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