According to a Freedom of Information (FOI) request submitted by AJ Bell, 286,000 Lifetime ISA (LISA) accounts have been opened since the savings product launched in April 2017.

Furthermore, the request revealed that the total value of LISA investments was calculated to be worth over £1.4bn in 2017/18, based on an average subscription of £3,114. However, when taking the 25 per cent bonus into account, the figure is likely to exceed £1.8bn.

Commenting on the data, AJ Bell senior analyst Tome Selby said: “The Lifetime ISA has been that rare thing in financial services: a useful, popular new product.

“Despite the restrictions in place on those who invest and the relatively low number of providers who have come to market to-date, almost 300,000 accounts have been opened since April 2017.

“When you combine the amount invested with the Government bonuses added, we reckon almost £2 billion has now been invested through LISAs, providing a rocket boost for first-time buyers and a useful top-up to traditional pension savings too.

“With the Help to Buy ISA due to be abolished in November this year it is likely the big banks and building societies will enter the fray.”

Selby argued that the government-imposed exit penalty of 25 per cent is “unnecessarily harsh”, leaving investors with less than they originally contributed, and suggested that reducing the charge to 20 per cent of the amount withdrawn would be “fairer”.

“While the LISA now has a firm foundation in the UK savings landscape, the 25% Government-imposed exit penalty for early withdrawals is unnecessarily harsh and could leave investors with less than they originally contributed. Reducing this charge to 20% of the amount withdrawn – in effect returning the Government bonus - would be fairer and make explaining LISA’s benefits more straightforward,” he said.

In addition to this, the AJ Bell analyst also recommended that government revisit the current age restrictions of the LISA, which bar anyone aged 40 or over from investing in the savings vehicle, indicating that increasing the limit could be “part of the government’s drive to solve the self-employed savings crisis”.

Selby concluded: “There are now around 5 million self-employed people in the UK, the majority of whom have little to no retirement savings at all. Creating attractive options for this growing section of the workforce is essential if we are to avoid huge problems further down the line.

“Lowering the exit charge and scrapping the age restrictions would supercharge the LISA for future investors.”

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