Nearly one in three under-40s will cut the amount they invest into their pensions or leave workplace pensions in order to concentrate on saving into Lifetime Isas, according to research from MetLife.
Its nationwide study of 1,071 employed adults aged 18-plus between 30 January and 2 February this year found 23 per cent will reduce pension contributions in favour of Lisas.
Nearly one in ten (nine per cent) will quit workplace pensions so they can invest in Lisas, which offer bonuses enabling them to save for a property, as well as for retirement.
Lisas are only available to those under 40, and once opened the money can not be withdrawn before 60 without a heavy penalty of 25 per cent - unless the money is used to buy a first property.
According to the Metlife survey they appear popular, with around 38 per cent of under-40s considering investing in one.
But their competition to traditional pensions poses a threat to retirement saving and the success of auto-enrolment, although more than one in five (21%) of under-40s admit they have not heard a Lisa.
The Lifetime Isa has been available since 6 April for investors aged between 18 and 40. Anyone who takes out a Lifetime Isa, can save up to £4,000 each tax year into the vehicle and will receive a government bonus of 25 per cent of the contribution.
So if someone pays in the maximum £4,000 contribution, they will get an additional £1,000 from the government.
Some advisers are also worried about the potential impact of Lisas – 69 per cent believe they will harm retirement saving creating the risk of a two-tier pension saving system according to a a poll carried out by Pollright of 107 specialist retirement advisers in February 2017.
Simon Massey, wealth management director at MetLife UK said: “It is very welcome that the government is encouraging saving and the Lifetime Isa offers generous bonuses, but it is worrying if people are going to ditch pension saving in favour of Lisas.
"Pension savings attract tax relief and employers are duty bound to top up contributions."
However Tom Selby, senior analyst at platform AJ Bell, said fears were overblown.
“The fact that less than 1 in 10 people plan to opt out of a workplace pension to save in a Lisa suggest fears about the product undermining auto-enrolment have been vastly overblown.
"Clearly, it is important savers are aware of the value of the employer contribution they will be giving up, which is why the FCA has mandated specific risk warnings in the information providers send to customers."
