Lifetime Isa sales have failed to live up to government expectations, making them more exposed to being abolished, as called for by MPs.
According to figures published today (31 August) by HM Revenue & Customs (HMRC), a total of 166,000 Lifetime Isa (Lisa) accounts were opened last year, corresponding with £517m saved, averaging at £3,114 per account.
The government had envisaged the opening of about 200,000 accounts in the first 12 months.
The Lisa was introduced in April last year and is aimed at the younger generation of savers who want to save for retirement or buy a first home.
It allows those aged between 18 and 39 to save up to £4,000 each tax year into the vehicle and receive a government bonus of 25 per cent of the contribution.
Last month, MPs on the Treasury select committee called for the abolition of the Lisa, saying it was too complex and not popular among savers.
Financial experts disagree, however, arguing today's figures showed the new savings product was working.
Laura Suter, personal finance analyst at AJ Bell, said today’s figures were not far from the government’s projections.
She said: “That’s also despite the fact that there are only a handful of providers offering the product, no major bank offering it and until this month [there was] only one cash Lifetime ISA provider.”
She added: “It’s also worth noting that the average amount subscribed is £3,114, so near the £4,000 annual limit.
"This shows that many people will be putting away the maximum amount each year and making the most use of that 25 per cent government bonus."
Ms Suter said as the Help to Buy ISA is phased out, more providers would "undoubtedly" offer the Lifetime ISA instead, "boosting take-up of the accounts further".
Skipton Building Society is the biggest provider in the market, with more than 110,000 Lisa customers at the end of June, followed by Hargreaves Lansdown with almost 48,000 accounts, and Nutmeg, which has more than 11,000 Lisa customers.
According to Tom McPhail, head of policy at Hargraves Lansdown, the take up of the Lisa "has been steady rather than spectacular".
He said: "Clearly it has been popular for those that have made use of it, so arbitrarily scrapping it now risks alienating those who are by definition among the younger savers.
"We would like to see the Treasury take a look at the possibilities for simplifying the savings landscape and reducing the range of options open to investors. Complexity can act as a deterrent to taking any action at all."
Overall, the HMRC figures show the number of new Isas has fallen to its lowest since 1999/2000.
In the year 2017/18, 10.8 million new accounts were opened, down from a high of 15.2 million in 2010/11.
However, the amount of money saved into Isas increased in the past year, a rise of £7.8bn to £69.3bn.