The government has been urged to remove the transfer limit on its Lifetime Isa to encourage more people to switch to the product.
The Lisa was introduced in April last year and is aimed at a younger generation of savers who want to save for retirement or to 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.
Financial services firm OneFamily said a problem occurs for those who took out a Help to Buy Isa, launched in 2015, who want to move their savings into its improved long-term replacement, the Lisa.
Customers who took out a Help to Buy Isa and have saved the full amount would now have £9,400, plus interest, in their Isa and research from OneFamily shows more than a third of such savers want to move their savings to a Lisa.
But the government will only allow customers to transfer £4,000 per year into the Lifetime Isa, meaning consumers have to decide between splitting their input over three years or sticking with the less fruitful Help to Buy Isa.
Nici Audhlam-Gardiner, managing director of OneFamily’s Lifetime Isa, said: "By not allowing Help to Buy Isa customers to transfer their full savings into the Lifetime Isa, the government is holding customers back from making the most of the greater benefits and flexibility available on the new product.
"The Help to Buy Isa was always designed to be a short-term product, whereas the Lifetime Isa means young people are not only saving towards that all important first home purchase but can keep the account open and give their retirement savings a much-needed boost too.
"Additionally, the Lifetime Isa can be used, its entirety, for a first-time home deposit, whereas the Help to Buy Isa bonus can only be claimed on completion of a first home purchase."
But last week, Michael Johnson, independent research fellow at the Centre for Policy Studies, claimed a Lisa was better for low earning millennials than a standard pension pot.
Benefits of the Lisa compared to the Help to Buy Isa include a higher maximum yearly contribution — £4,000 instead of £2,400 — and the fact the government pays in its 25 per cent bonus in monthly instalments, rather than upon completion of a house purchase, OneFamily stated.
Consumers can also choose between a more high risk, high reward stocks and shares Isa or a cash Isa within the Lisa plan, whereas the Help to Buy scheme only offers a cash savings account.
Importantly, the maximum bonus a Help to Buy Isa can offer is £3,000 — less than 10 per cent of the Lisa’s maximum £32,000.