The new Lifetime ISA is not a “Trojan Horse” to change the pensions tax relief system, according to a Treasury employee.

Speaking at the Westminster Business Forum, today, HM Treasury head of savings branch, pensions and savings team Edward Odell said the LISA is not designed to “cut across the pension system” or as a “Trojan Horse to get rid of the pension tax relief system”.

“The Lifetime ISA aims to tackle the binary choice that many younger savers face, which is between saving for a home or saving for later life and this was an issue that was raised in last year’s consultation on pensions.”

He stated that there wasn’t a consensus on pension tax relief from the consultation on incentivising people to save. Instead he said there was a “desire for a flexible product that could create a meaningful incentive to save”.

The LISA, which will be available to anyone under 40 from April 2017, was introduced by Chancellor George Osborne at the Budget in March. The government has said for every £4,000 saved it will add £1,000 every year until the age of 50.

Those who open a LISA will be able to access their money at any time for a proposed charge of 5 per cent, a move which was criticised by the pensions industry. However, Odell said the Treasury is still in the process of finalising the details on the Lifetime ISA.

Commenting on the LISA, Wealth at Work director Jonathan Watts-Lay said the industry will have to wait until the specific rules are defined to understand how it will work in practice.

“Assuming it will work like current ISAs then employers may, for example, take a ‘mix and match’ approach, allowing employees to divert their employer benefits to various saving vehicles.

“However, if employer pension contributions are diverted to ‘extra salary’ for individuals to fund their LISA, there will be no tax and national insurance relief. At face value employees could be worse off, but may trade this in favour of flexible access with the government top-up.”

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