The industry has voiced more concerns over the Lifetime ISA as the FCA consultation on rules for the sale of LISAs comes to a close.

It also follows the royal ascent of the Savings (Government Contributions) Act 2017 on 16 January, which legislates for the introduction of the LISA. The product will launch in April this year and be available to any adult under 40.

Eversheds head of pensions Francois Barker noted that the FCA’s consultation paper makes clear that the LISA has a “number of potential pitfalls” which could “sow the seeds of another mis-selling scandal”.

“Although LISAs may benefit some savers, many are unlikely to appreciate that they could miss out on thousands of pounds worth of employer pension contributions if they choose to save in a LISA instead of a workplace pension. The way that LISAs are being explained could also mask the fact that people stand a real chance of losing money if they withdraw their money early,” he explained.

He added that the complexity of LISAs and the potential for savers to misunderstand the product is a “major concern”.

On a separate issue, Suffolk Life head of product and insight Greg Kingston highlighted the different illustrations required between SIPPs and LISAs.

“Illustrations for SIPPs already show retained bank interest but no such requirement exists for the LISA. In fact, providers can get away with a generic illustration with no requirement to provide a personal projection”.

LISAs holding cash only do not require an illustration whereas those holding investments are proposed to provide a generic illustration in the form of a table with information such as the age at which the investor started saving, total amount paid in, government bonus and estimated outcome at 60, among others.

Kingston continued: “Since the very first announcement accusations have been made that the LISA is a stealthy step towards wider pension reform. The inconsistent standards of two different retirement wrappers will add fuel to those theories and there must be a genuine concern that the LISA risks poor consumer outcomes and reduced retirement saving.”

However, Nucleus product technical manager Rachel Vahey believes the LISA is a “significant addition to the savings environment”.

Despite this, Nucleus would still like to see more research by the government and FCA to identify the target audience, the size of the likely take-up and the implications of its introduction.

“We agree with the FCA there are risks attached to LISAs that investors need to be aware of. How successful the LISA will be will depend immensely on how it’s positioned and communicated to potential investors,” she added.

In addition, Hargreaves Lansdown chartered financial planner Danny Cox said: “The LISA will be particularly attractive to savers and investors looking to buy their first home, and to those looking to complement their existing pension plans. There are over 500,000 Help 2 Buy ISA accounts and we expect considerable interest from holders looking to transfer their values across to LISA from April 2017. The main advantages of LISA over H2B ISA are higher subscription levels, bonuses paid every year, and stocks and shares versions available.”

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