Richard Parkin, head of retirement at Fidelity International has said the uptake of the Lifetime Isa by those under the age of 40 will be higher than the government has predicted.
The Lifetime Isa is due to become available next April. In this year's Budget in March, the projected cost to the exchequer for the Lifetime Isa for 2017-18 was £170m and for 2018-2019 was £330m.
From 2019-20 the projected cost was £590m, and from 2020-21 was £850m.
However, Mr Parkin told FTAdviser: "It will be interesting to see what the market does though - anyone who is saving for a house, why wouldn't you do it? And I suspect there will be a much bigger demand for that than perhaps government has anticipated.
"It will be a lot more popular than the government thinks - there's free money. Even if you are not saving for house, I suspect well off parents and grandparents all over the land will be bunging money into them."
He added what would be "really dangerous" is if as a result of increased demand the government, for example, pulled the product or reduced the bonus.
Despite the possible outcome Mr Parkin forecast, he remains positive about the usefulness of the Lifetime Isa for consumers.
Some commentators have been disparaging about the product. Earlier this month former pensions Steve Webb warned the tax benefits of pensions were being degraded in favour of the Lifetime Isa.
At that time, the director of policy at Royal London and former coalition government pensions minister said the Lifetime Isa “was a horrible hybrid”.
In September this year, another former pensions minister, Baroness Ros Altmann, said the Lifetime Isa isn’t even close to being as beneficial as a pension post retirement freedoms, and warned it was a mis-selling scandal waiting to happen.
However, Mr Parkin told FTAdviser: "Anything that is going to give people a 25 per cent government bonus is very welcome for all our clients, and we will be launching a Lifetime Isa. We are not committed to do that for April but we have said we will be in the market for the next tax year."
"I don't think opt out rates from auto-enrolment...if they are higher I don't think it's because people didn't like pensions. If people want to save for a house, and can't afford to save for retirement as well, then they will have opted out already.
In August this year, Mr Parkin claimed the Lifetime Isa will be good for auto-enrolment because it will make saving for a first home more affordable, thereby leaving the under-40s freer to save for a retirement as well.
Andrew Whiteley, director at Proviso Financial Planners said: "They are probably trying to encourage people to invest in it - how can people know these things?
"There are tax advantages to investing in it but how anyone could extrapolate those figures I don't know.
"It is important that the revenue have an idea of the cost and if they have got it wrong there will be some detrimental effect in the future."
