Savers looking to use the lifetime ISA (LISA) could be faced with higher charges, reducing the value of their pots by 13%, according to analysis by the Pensions Policy Institute (PPI).
The Financial Conduct Authority recently announced plans to cap exit charges on new pensions and limit penalties on policies to 1%.
The LISA will not be regulated in the same way, so individuals withdrawing money for any reason other than to buy a first home will be at risk of higher charges.
From April 2017, the LISA will be available for adults aged 18 – 40. Savers can contribute up to £4,000 per year and will receive a 25% government bonus.
Individuals accessing their pot before the aged 60 will forfeit the bonus and be subjected to a 5% interest charge – unless money is withdrawn to purchase a first home worth up to £450,000.