A government-backed tax-free savings scheme to help first-time buyers and pension savers has come under fire amid fears that consumers could end up losing money.
The Lifetime Isa (Lisa) lets people save for the "big money milestones", said Which?, of retirement or buying your first home.
But MPs on the Treasury Select Committee have warned the "dual-purpose design" may be diverting people from "more suitable products and putting part of their savings at risk".
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What is the Lifetime Isa?
The Lisa was introduced by then-chancellor George Osborne in 2016, it launched in 2017, letting people save up to £4,000 tax-free each year, as part of their annual Isa allowance.
The "main selling point", said Which?, is the "generous 25% bonus" that the government pays on the savings when you come to use them either to buy your first home or from age 60 to retire.
You have to be aged 18 to 39 to open a LISA account and must make your first payment by the age of 40.
Investment and cash Lisas are offered by a number of banks, building societies and investment firms, said Unbiased, "so it's worth shopping around".
How does a Lifetime Isa work?
You can usually open a Lisa in-branch or online.
Up to £4,000 can be put into a Lisa each year until you’re 50 and the government will add a 25% bonus to your savings up to a maximum of £1,000 annually.
The bonus is paid monthly, said Which? "so you benefit from compound growth".
There are "a few restrictions", said MoneyHelper, if you want to use the product to purchase a property.
This option is open only to first-time buyers and the value of the property has a limit of £450,000.
You can withdraw your Lisa money for your first home, for your retirement from age 60 or if you have less than a year to live.
Taking the money out "for any other reason", said Unbiased, will incur a 25% withdrawal charge. The government will get its bonus back and "you'll lose out on some money".
Should you open a Lifetime Isa?
One of the main issues with a Lisa is the product has remained "relatively unchanged" since its launch eight years ago, said the Financial Times.
The property price cap figure has "remained frozen since it launched in 2017", said MoneySavingExpert, despite house prices "rising significantly" since then.
This leaves some first-time buyers "unable to find a suitable property" or paying a penalty to withdraw their funds.
The Treasury Select Committee has warned that the product's focus on helping people save for both the short and long term means it is "more likely consumers will choose unsuitable investment strategies".
MPs also highlighted that a recent "surge in withdrawal charges" is a possible indication that "the product is not working as intended".
If you are considering a Lisa, the 25% bonus is still a "higher annual rate than you'd be likely to get from other forms of Isa", said MoneyWeek, but you need to make sure you are comfortable with the risks.
