The number of Lifetime Isa sales in the product’s first year have fallen around 34,000 short of government expectations.
Savers have also placed around £400 less into the vehicle than predicted, according to statistics from HM Revenue and Customs this morning.
There have been 166,000 accounts taken out in the first twelve months of the Lifetime Isa, with an average of £3,114 invested, compared to the government’s assessment that 200,000 savers would subscribe at an average of £3,500.
Based on the difference, overall contribution levels are £180m lower than anticipated.
Royal London policy director Steve Webb says: “The Lifetime Isa is a complex product which seeks to combine elements of the Help to Buy Isa with long-term pension saving. It seems that this complexity, plus a lack of providers in the market, has combined to produce a disappointing first year for the Lifetime Isa.”
Webb says: “There is a strong case for the government to think again about whether setting up a rival product to the workplace pension is really the best way to help younger people save for the long term.”
However, other providers have come to the defence of the product in recent months, including AJ Bell and Nutmeg.
AJ Bell personal finance analyst Laura Suter says: “The figures show that first-time buyers and those saving for retirement are maximising their chances of affording a property or pension by making use of the 25 per cent government bonus on up to £4,000 saved each year.”
Nutmeg chief executive Martin Stead says the Lifetime Isa is “starting to address the enormous savings gap in the UK”, and getting people to invest earlier, as their Lifetime Isa customers report they are planning to invest for an average of 16 years.
Nutmeg argues that the contribution limits both for age and property purchases should be increased, as well as greater promotion of the product and its benefits, as rumours swirl that the government has begun to lose faith in the Lifetime Isa.