Calls to scrap the Lifetime Isa (Lisa) have been branded "nonsensical" by investment providers.
Last week (26 July), the Treasury select committee (TSC) recommended abolishing the Lisa. However, industry figures such as Martin Stead, chief executive at Nutmeg, have questioned the financial and ethical implications of doing so.
He said Nutmeg has more than 11,000 Lisa customers, managing in excess of £50m, with high levels of customer interest since launch.
He said the popularity of their Lisa has resulted in roughly £12.5m in government bonuses for Nutmeg's customers and he called the TSC’s report, calling for its abolition, "nonsensical".
"The Lisa is not yet two years old. The government should be investing time and money in promoting this product, not debating whether or not to keep it”, he added.
As a tech-enabled business, Mr Stead said Nutmeg can design and launch products much quicker and at a lower cost than most incumbent providers, meaning the Lifetime Isa proved popular without his company having to spend a significant amount of money marketing it.
Richard Stone, chief executive of The Share Centre, acknowledged while the product could be improved, the Lisa was still a “fundamental part” of tackling the lack of individuals sufficiently saving for later life. He also disagreed with the TSC’s calls for its abolition.
He commented: "One of the great features of the Isa regime is that it has not suffered from continuous government changes or interventions in the way that pensions have.
"To abolish the Lifetime Isa now would damage that track record and potentially make it far harder to launch any other new savings and investment incentives."
Hargreaves Lansdown, a provider with 42,000 Lifetime Isa accounts with a total of £218m invested, has previously lobbied for a simpler savings market.
Tom McPhail, head of policy at Hargreaves Lansdown, said Lifetime Isas were launched at a time when financial firms were already dealing with a number of significant regulatory changes.
Mr McPhail said: "This meant many providers were not in a position to launch on day one and in turn meant the product enjoyed less publicity and momentum than might otherwise have been the case.
"Whilst we would still support a simpler retail savings landscape, the current government lacks the political capital to make these kind of changes right now - we need to get through Brexit first and probably another general election too."
Kay Ingram, director of public policy at IFA LEBC Group, said the Lisa needed simplification, not abolition, which would risk alienating young savers struggling to buy their first home.
She said: "The committee is right to highlight the complexities of the Lisa, which unfairly penalises savers for withdrawing cash which is not then used specifically for the purchase of a home – but a relatively simple reform is all that is required, not outright abolition of the scheme."