Banks have said the product is too complex but some robo advisors are already offering the service.
Many high-street banks rejected the government’s savings programme, or Lifetime ISA, after it launched last week for being too complex, but some for those seeking to disrupt the mark – the so called robo advisors - are embracing the new tax wrapper.
Market leader in that field Nutmeg, which has £600m of assets under management, has launched its Lifetime ISA, which is available to consumers aged 18 to 39 years old. The ISA was announced by former Chancellor George Osborne and offers savers a 25 per cent annual bonus.
Only two other firms are offering the product so far: Hargreaves Lansdown, the UK's biggest broker and the Share Centre, an online stockbroker. Moneybox, an app-based robo-advisor aimed at younger investors, is also planning to launch a Lifetime ISA in the coming weeks. The company declined to comment.
Many say the offering is too complex for consumers to understand. Marianne Slamich, a spokeswoman at robo advisor Scalable Capital, said her company was not planning to offer the service because of its complexity.
“The Lifetime ISA comes with a 5 per cent exit penalty which would hit retirement savers hard should they need to withdraw their pension early for any other purpose than buying their first home,” she said. "We believe that a Stocks & Shares ISA is a more suitable product for many savers – it is flexible and has simpler rules.”
Around a dozen or so other firms are planning to offer the savings plan in the next year or two but no dates have yet been given.
The Lifetime ISA allows savers to put aside up to £4,000 per year, with the government matching contributions by 25 per cent, up to a maximum of £1,000 a year, until an individual's 50th birthday. Consumers can also invest up to £20,000 a year on other ISAs, such as the cash and stock ISA and the Innovative Finance ISA. However, individuals can only contribute to one Lifetime ISA in any tax year.