Over four in 10 (43%) young people have hinted that they would use a lifetime ISA (LISA) for retirement planning, Hargreaves Lansdown (HL) has found.

In a survey of more than 2,000 people, carried out by Opinium on behalf of HL, 27% of people aged between 18-34 said they would use a LISA alongside a pension for their retirement planning, with a further 15% saying they would use a LISA instead of a pension.

Just 10% in this age group said that LISAs would not be the right option for them. However, one in five (20%) said they were unsure, with a further 20% saying they didn’t know what a LISA was.

Head of retirement at HL, Helen Morrissey, said: “The Lifetime ISA has the potential to really help people boost their retirement planning with just over 40% of 18-34 years saying they have a place in their retirement planning. The 25% bonus on contributions up to £4,000 per year can help you build a hefty sum over time so it’s a great vehicle to use for savings alongside your workplace pension (where you also benefit from an employer contribution).

“For groups such as the self-employed who don’t benefit from workplace pensions, LISAs can help them build up a retirement pot that they can access early in case of emergencies subject to a 25% penalty. This is particularly the case for those paying basic rate tax as the 25% bonus acts in a similar way to basic rate tax relief in a pension – and the income is all tax-free. Higher rate taxpayers are usually better off in a pension where they can get 40% or even 45% tax relief on their contributions.

“However, there are challenges. Awareness of LISAs is still too low with one in five 18–34-year-olds saying they don’t know what a LISA is. When we look across all age groups the number swells to one in four (24%). This means there are people out there who could really benefit from a LISA who don’t know what one is.”

The survey also found that just under one in 10 (8%) of young people said they wouldn’t use a LISA as they didn’t qualify for one.

Currently, you cannot open a LISA if you are over the age of 40.

HL has called on the Government to allow people up to the age of 55 to be able to open and contribute to LISAs.

Morrissey added: “There is also more that needs to be done to help people get the most from their LISA. As it currently stands people over the age of 40 cannot open a LISA and this really limits the options for people over this age who don’t feel like a pension is the right retirement vehicle for them.

“Similarly, the 25% penalty on early withdrawals can also act as a disincentive as it not only takes away the benefit of the government bonus, but also some of your hard-earned savings too. HL has called on government to reform the LISA by enabling people to open and contribute to LISAs up until the age of 55. We have also asked for the withdrawal penalty to be reduced from 25% to 20%.”

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