Auto Enrolment and the new Lifetime ISA

Since the chancellor made his budget statement yesterday I have read numerous articles, like this one: http://www.moneymarketing.co.uk/huge-risk-lifetime... and attended a budget briefing from the prominent Manchester based accountancy Kay Johnson Gee: http://www.kayjohnsongee.com both of which suggest there is a potential conflict between the Lifetime ISA and Auto Enrolment.

The article in Money Marketing has the headline: 'Huge risk' Lifetime ISA will damage auto enrolment 

It allow contains the following quotes:

“We already know that people are stretched financially, and the attraction of the flexibility offered by a Lifetime Isa may make it an ‘either/or’ for savers.”

Aegon Pensions Director Steven Cameron says: “There is a huge risk that the Lifetime Isa will encourage some under-40s to turn down the opportunity to be auto-enrolled into a workplace pension, even though that comes not only with the equivalent 25 per cent Government bonus on personal contributions, but also with an extremely valuable employer contribution.

Personally, I agree with the Financial Planning representative in the article on this one. 

There are some fundamental differences between the two, most importantly opting out in favour of saving outside auto-enrolment means giving up the employer contribution. At the current time an employer matches the individual contribution of 1% and in future will contribute 3% when the employee contributes 5%.

On which note, the employee contribution benefits from tax relief in the same way as the ISA as mentioned by Stephen Cameron above. 

Finally, the pension can be drawn without penalty from age 55, unlike the new ISA.

Now, it would be remiss of me not to highlight the merits of the ISA, namely being able to utilise the funds for a home purchase prior to age 60 and then being able to withdraw the monies without tax being levied after age 60. 

Loosing out on a 60% uplift from your employer is difficult to ignore. 

In circumstances like this are are many variables depending on an individuals circumstances but, in general my first impression: If you are saving for retirement stick to auto enrolment.