Reward versus relief
The Lisa’s 25 per cent government bonus is paid monthly, which looks pretty tasty from a compounding perspective. Moneyfacts figures indicate that the average annual return for UK pension funds sits at 10.5 per cent – so with an extra 25 per cent on top, savers can see how their money can make them more money.
The Lisa’s bonus also marginally beats the 20 per cent tax relief offered to basic-rate taxpayers through a pension scheme
With the final sentence, the writer appears to be unaware that both (80% of X) + (25% of 80% of X) and (80% of X) + (20% of X) are equal to X, and exactly equivalent. Employer contributions and any NI uplift from salary sacrifice then push the advantage to the pension. LISA's potential offsetting advantage, if it survives, is that it is fully tax free on withdrawal. Not covered at all in the article, unfortunately.
Further down the article:
There are two options: either young people need to be educated about finance, or the government needs to make the pension regime easier for people to understand in the first place.
The problem with this is that in making pensions easier to understand, the government will do as it always does and erode the benefits to pension savers so as to accrue extra benefits for itself, meaning that the better option here for individuals would actually be the education one. Making the system dumber may be easier than making people smarter, but the easier course is not necessarily the better or the right one.
And it is the government that made pensions hard to understand over time anyway. To the extent that they are actually hard at all, that is. The LTA and AA taper are fiendish, but I am never clear why basic tax relief appears so mysterious to most people. Under employer GPP schemes it can be especially hard to actually see it occurring, but understanding that it happens nevertheless doesn't seem particularly intellectually challenging to me. Shrug.
DB pensions in particular were trivial to understand from an individual's perspective. Work for a period, retire, and receive payments for life from your ex-employer. Sure, this wasn't entirely a bed of roses, with transfer problems, loss of benefits, and Robert Maxwell-shaped devils lurking in the details, but conceptually simple at least. (Not that I have ever had one...) All the complexities resided in the hands of the professionals running them.
Finally:
A bonus also feels more like a reward than tax relief does.
Not where the 'bonus' is 25% but the tax relief is at 40%, 45%, or 60% it doesn't. Although of course we should be clear that this isn't tax 'relief' but rather tax 'deferral', and potentially tax rate 'arbitrage'.
Now, this an op-ed piece so the author is entitled to say what they like. It's just that this one has enough maths errors and half-truths in it to have rubbed me up the wrong way a bit today. Mostly because the author is a personal finance professional who I think should perhaps have known better.