Over seven out of ten firms - 72 per cent - are confused by the launch of the Lifetime Isa, which is scheduled for next April 2017, an Association of Consulting Actuaries report has found.
The Lifetime Isa is targeted at those aged between 18 and 40 and offers the capacity to save up to £4,000 per year with a 25 per cent bonus on savings made before age 50.
After age 60 all savings can be taken tax-free, with one of the messages from the government to the public being to use the product to save for retirement.
Confusion has arisen among the firms 455 firms surveyed with fewer than 250 employees, due the fact the government has a parallel initiative of requiring all small firms with one or more employees to auto-enrol employees into qualifying pension arrangements.
The survey, which was conducted in June and July 2016, found six out of ten firms - 60 per cent - support the current structure of pension taxation but want more help targeted on lower income groups.
This would mean further reductions in pension tax relief at the top income levels with more relief at lower income levels if costs are to be constrained, and perhaps a flat rate relief up to a capped annual amount.
A total of 25 per cent of firms support a pension Isa type model, where savings are taxed with the pension paid tax-free, and just 13 per cent would support a change where national insurance relief on employer pension contributions are abolished.
The Association of Consulting Actuaries chairman, Bob Scott, said initiatives to encourage saving generally are to be welcomed, but incentives need to be viewed in a holistic way so longer-term saving attracts greater support, and to avoid conflict between products.
He said: "Lisas may not initially discourage younger employees from opting-out from auto-enrolment pensions whilst minimum employee contributions are below 1 per cent of earnings, there must be a real query over whether this will remain the case when minimum employee contributions climb to over 3 per cent of earnings in 2019 – and possibly higher levels in years to come."
Mr Scott added the present chancellor would be wise to examine carefully with the Department for Work and Pensions how Lifetime Isas might fit alongside encouraging greater saving in auto-enrolled pensions before what "now looks to be a premature launch".
With regard to the reform of pensions tax, Mr Scott added this was long overdue, and the more tinkering the government does, the more that individuals and their employers lose confidence in pensions.
He said: "It is clear from our survey that smaller employers favour both restricting tax relief for higher earners and targeting more help on lower income groups.
"The chancellor should have that aim at the front of his mind and, we suggest, he should avoid the temptation of measures that are designed to raise tax revenue by restricting the overall level of relief available."
