“The money purchase annual allowance of £4,000 was introduced to stop ‘recycling’, where people access their pension and then re-invest contributions for another round of tax relief, but the same thing could be achieved with anti-recycling rules, which only kick in when someone has accessed their pension with the express intent to recycle the cash.”
There are also calls from the industry to permanently cut the penalty for the Lifetime Isa.
At the moment, if you take cash out of the Lisa before the age of 60 – for any reason other than to buy your first property or retirement – you face a penalty of 25 per cent.
Morrissey says cutting the penalty will prevent people losing savings at a time when they really need it.
She says: “While [the 25 per cent penalty] may look like you are just giving up the government bonus, it also takes a chunk of the money you have saved.
“It means anyone turning to this money while life is tough will pay a horrible price for having tried to do the right thing.
“We want to see the Lisa penalty reduced to 20 per cent, to help people use their money in the way that makes most sense for them, without losing some of their own savings at a time when they can least afford it.”
Ima Jackson-Obot is deputy features editor of FTAdviser