The new Lifetime ISA (LISA) launched yesterday (Thursday 6 April), to a mixed reception.
The Pensions and Lifetime Savings Association (PLSA) said unprompted awareness of LISA among 18-19 year olds is low and there is some confusion around the difference between the new product and a workplace pension.
Nigel Peaple, deputy director defined contribution, for PLSA, said: "Worryingly, 40% of 18-39 year olds who are already paying into a workplace pension say that if they start saving in a LISA they will stop saving into their pension."
"If this were to happen, these savers could miss out on up to two decades of employer contributions, making it even harder for them to save adequately for retirement."
Peaple added that while the LISA can be the right choice of retirement saving product for some groups, such as people who are self-employed, overall the organisation did not believe it should replace workplace pensions.
"The LISA does not provide strong governance, common in a workplace pension, nor value for money ensured by the charge cap, and, crucially, unlike workplace pensions, it does not benefit from mandatory employer contributions," he said.
However, pensions consultancy Hymans Robertson said there is appetite to invest in a LISA, and it's not a case of either the LISA or a pension.
Paul Waters, partner at Hymans Robertson, said: "Our research found 61% of under-40s said they'd open one of the new accounts, but people still recognise the benefits of pensions, with more than two thirds saying they would save into both at the same time."
"While people view LISAs as a product that could help long-term savings, they still clearly appreciate the benefits of pensions, particularly the extra boost they get from employer contributions."
The launch already seen a degree of controversy after the media reported that Lifetime ISAs are only available from three providers, with no high street banks offering them yet.
Hargreaves Lansdown, Nutmeg, and the Share Centre launched LISAs on Thursday, and Skipton Building Society will offer a cash LISA from June.
First published 07.04.2017