Robo-adviser Scalable Capital has said it will not offer the Lifetime Isa because of concerns the product is too complex to be sold without advice.
The product will launch next month for adults aged less than 40 to save money for a house or their retirement.
Up to £4,000 can be saved into the new Isa each year and savers will receive a 25 per cent bonus from the government on top.
But the product also comes with a number of rules and an exit penalty for those who want to withdraw their money.
Adam French, the co-founder and chief executive of Scalable Capital, said: “We will not offer the Lifetime Iisa in the near future. It is a complex product that should be sold with clear suitability guidelines and structured financial advice.
“The Lisa is expected to have huge take up among young savers. Creating a 25 per cent government bonus might be an accessible way of receiving tax relief.
“However the Lisa comes with a 5 per cent exit penalty which would hit retirement savers hard should they need to withdraw their pension early for any other purpose than buying their first home.
“We believe that a stocks and shares Isa is a more suitable product for many savers – it is flexible and has simpler rules.
“It has a higher annual allowance, no penalties on withdrawals before the age of 60 and can also be used for buying property valued at more than £450,000.”
Last year Ros Altmann, former pensions minister, warned the Lifetime Isa isn’t even close to being as beneficial as a pension post retirement freedoms.
Speaking at the FTAdviser Retirement Freedoms Forum in London, Baroness Altmann said: “In my view Lifetime Isas risk poorer pensioners in the future and it is a disaster in the making.
“This product has mis-selling written all over it. Just think about it from a customer’s perspective. The Lifetime Isa isn’t a simple product. It needs somebody to understand the whole environment.
“It is not simple. It is not a pension. This [loss of the 25 per cent bonus and 5 per cent] penalty on withdrawal is punitive. I just cannot for the life of me see how you can justify that when I worked so hard, for so long, to get the cap on pension exit charges down to 1 per cent.
“I am not surprised that so many providers are saying they don’t want to bother with this thing, not just because they don’t know all the details but because it is fundamentally – as a pension - is not a good product.
Last week Skipton Building Society announced it would offer the Lisa from June.
Skipton claimed its decision made it the first high street provider to commit to offering the controversial savings product.
It is also the first provider to commit to offering a cash-only Lisa.
Other providers that will offer a Lisa product - including Hargreaves Lansdown, The Share Centre, Scottish Friendly and True Potential - will offer stocks and shares Lisas.