Almost half - 44 per cent - of Britons aged 18 to 39 and eligible to take out a Lifetime Isa say they would be most likely to use it to save for retirement.
A total of 14 per cent of the 1,018 such adults questioned in June by YouGov for Zurich said they would use the Lisa to put away money for a first home.
Despite assurances by the government that the Lisa is not a replacement for a pension, thousands of younger people could be drawn to it as the main way of saving for retirement, stated the pension provider.
Zurich pointed out those who opt for a Lisa over a workplace pension will miss out on valuable employer contributions.
In March this year, an inquiry into auto-enrolment by the Work and Pensions Committee re-opened to consider new evidence on whether the new Isa could undermine workplace pensions.
Meanwhile in May, it was revealed the vast majority of self-invested pension providers viewed the Lisa as a “direct attack” on the pensions industry.
Now, research by Zurich has shown that a basic-rate taxpayer saving £100 a month into a workplace pension over 20 years would build up a nest egg of £45,231, on the assumption the growth rate for equities of 2.5 per cent and the employer contribution is 3 per cent.
The same person saving into a stocks and shares Lisa would see their pot fall by almost a third, to £31,097 - again assuming the growth rate for equities is 2.5 per cent - leaving them £14,000 worse off.
Savers who withdraw their money from the Lisa before age 60 will have to repay the government bonus, plus a 5 per cent exit fee, unless they use the cash to buy a first home.
However, Zurich found this would fail to deter 14 per cent of people from dipping into a Lisa, with a further 22 per cent unsure, meaning over a third - 36 per cent - could withdraw their savings prematurely.
Alistair Wilson, Zurich’s head of retail platform strategy, said the Lisa is a valuable extra option for people who can afford to put more aside for retirement, or those saving for a first home; but it is not a replacement for a pension.
“Young people who opt out of auto-enrolment would lose valuable employer contributions, resulting in a substantially lower income in old age.”
He added that if used as the sole savings vehicle, the Lisa could undermine the UK’s long-term savings culture, with the worry being that young people will treat it as a piggy bank pension, which they can dip into when they need extra cash.
“It’s concerning that as many as a third of people could withdraw their long-term savings in a Lifetime Isa ahead of retirement, which may leave them without an adequate income in old age.”
Daren O’Brien, director at London-based Aurora Financial Solutions said along with choice and access to saving comes responsibility.