Steve Webb, who was Pensions Minister in the Coalition Government, during which time the reforms were initiated, also suggested the Lifetime ISA is a ‘Trojan horse’.
Speaking to about 70 delegates at the AMPS conference in London today, he referenced the much-repeated fear about the pension freedoms triggering unwise and flashy purchases such as sports cars.
He said: “One of the brakes on the Lamborghini at the moment is the tax. If we are really worried about people blowing their money, the LISA is far more prone to that than the pension is.”
The LISA is a way of “dipping toes in the water” for the previously floated but rejected idea of a flat rate tax relief, he believes.
He said it had been suggested that it is a Trojan horse and that the Treasury issued a statement to specifically deny this. But Mr Webb believes “it could be”.
He described the LISA as a “horrible hybrid, it really doesn’t know what it is”, adding: “I think the LISA is an abomination.”
It is “very difficult to see the current tax relief system holding”, he said.
He claims that “only the Mail, Telegraph and Times that stopped the flat rate tax relief”, saying it was pressure from newspapers that led it to be binned.
Though the LISA ought to be good for the self-employed, some have stated, most in this category are over 40 and therefore ineligible, he said.
Mr Webb said he doubted the Treasury thought about the impact on workplace pensions when the scheme was being devised.
The average person struggling in their 20s to rent a home is likely to opt out of auto-enrolment if they choose a LISA, as they couldn’t afford both, therefore “snatching defeat out of the jaws of victory” in regards to the progress with auto enrolment, he said.
AMPS chairman Neil MacGillivray told Mr Webb, on introducing him to the delegates: “You are the man who made pensions sexy. People now want to speak to us at parties - it’s great.”