The Treasury has predicted 800,000 savers will contribute to Lifetime ISAs [LISAs] by 2020/21, according to an impact assessment published today.
A quarter of this figure - 200,000 - is expected to save into LISAs in 2017/18 after the scheme is launched next April. The Treasury said the larger predicted take-up by 2021 would be partly due to the Help to Buy ISA closing to new applicants at the end of 2019.
For his part, Intelligent Pensions head of pathways Andrew Pennie (pictured) suggested the take-up figures could be even higher, but also said people were "deluded" if they thought they could use a LISA to save for both their first home and their retirement.
He said: "Given the number of people struggling to buy their first home and the many thousands who will already be saving to try and do so, I would have thought the forecast take-up figures are relatively conservative and will be at the low end.
"People using a LISA to save for their first home and their retirement are likely to be deluding themselves, however. Once they save enough to buy the home of their dreams, the likelihood is the LISA will be fully encashed, leaving an empty pension fund and the need to start retirement savings from scratch and over a much shorter period."
Pennie added: "Due to the magic of compound returns the best years of pension savings will have been lost."
In its assessment report, the Treasury outlined how it expected the average LISA saver would put away £3,500 per year - just £500 short of the scheme's annual limit.
Last year, however, the Money Advice Service found 21 million adults - or four in 10 - have less than £500 in savings. Another study, this time by Investec Wealth & Management, found nine out of 10 millennials - those aged between 18 and 35 - blame their failure to save on the high costs of living.
In September, the Treasury confirmed LISA bonuses would be paid monthly rather than annually, as was originally planned. The change was made to prevent savers being penalised unfairly by the 25% early withdrawal charge, removing a "major design flaw", according to Aegon pensions director Steve Cameron.
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