Lifetime Isa launched amid concerns it could hit pension auto-enrolment
The new Lifetime Isa must be kept under scrutiny to make sure it does not undermine workplace pension saving, insurers have urged.
The Lifetime Isa, or Lisa, scheme was launched on Thursday, but major banks have ruled out offering one from the day of the launch.
Many major high street names have said they are reviewing their position, or that they have no plans to launch a Lifetime Isa.
Lifetime Isas, which were unveiled during the Budget in March 2016 by then chancellor George Osborne, allow people to save for their first home or their retirement in the same pot, with a Government bonus.
But concerns have been raised over the charges people could generally face for taking money out for reasons other than their first home or their retirement - and that some people may ditch workplace pension saving in favour of a Lisa.
The Association of British Insurers (ABI) said it was urging the Government to monitor whether the Lisa has an impact on automatic enrolment into workplace pensions.
Auto-enrolment, which started in 2012, has so far been seen as a success, with around nine in 10 people who have been placed in their pension staying in it rather than opting out - and a strong appetite for saving among young people in particular.
But research from the Pensions and Lifetime Savings Association (PLSA) has found 40% of 18 to 39-year-olds who are paying into a workplace pension say that if they start saving in a Lisa they will stop saving into their pension.
Yvonne Braun, director of long-term savings and protection policy at the ABI, said: "The Lifetime Isa will be a very useful savings mechanism for some people but savers should only invest in a Lisa if they fully understand how they work.
"In particular, people should not forego their workplace pension to save for retirement in a Lisa as most people will be better off saving into a workplace pension because of the employer contribution.
"It is key that the Lisa does not undermine the success of auto-enrolment in workplace pensions and the ABI urges Government to monitor whether the Lisa is having an impact on the auto-enrolment programme."
Former pensions minister Baroness Altmann has said savers can receive much more than the 25% bonus offered by a Lisa from the employer contributions and tax relief they would get in a pension.
She said: "Pensions will usually give you far more than the Lifetime Isa on day one. It's just that this is not properly explained when you get your pension statement, so most people don't realise it."
Hargreaves Lansdown, Nutmeg and the Share Centre have previously confirmed plans to launch investment Lisas from day one of the scheme.
Skipton Building Society will offer a cash Lisa from June and will give further details closer to launch.
Neil Lovatt, commercial director at Scottish Friendly, which has also confirmed it will offer a Lisa, said: "Whether some industry figures like it or not, the Lisa is here to stay."