Nearly a third of people aged 18-40 in the UK will cutback on pension saving in favour of the Lifetime Individual Savings Account (LISA) launched last month, according to research by MetLife.
It shows that 23% of people in this age group will reduce pension contributions in favour of investing in LISAs, while 9% intend to leave their workplace scheme altogether so they can focus on the new savings accounts.
This confirms the fears of specialist retirement advisers, 69% of which are concerned the LISAs could deter pension investment, potentially creating a two-tier system for retirement planning.
"People have limited amounts they can afford to save, but it should not be a case of giving up on pensions for LISAs," MetLife UK wealth management director, Simon Massey, said. "It is important savers get advice on how best to save for retirement, as well as building up a deposit."
The LISA is designed to encourage saving among younger people by offering up to £1000 each year to savers until they reach 50, which can then be used for a house deposit, or kept until the age of 60 and used as a pension substitute.
MetLife's research involved surveying 1,071 employed British adults, and 107 advisers, earlier this year, finding that, although 38% of under-40s will consider investing in LISAs, 21% have never heard of the new savings plan.
In addition, it was found 39% of under-40s believe the launch of the LISA will not have an impact on their long-term saving plans, while 56% say they find the saving options confusing.
"The LISA is designed to help people save for house deposits and is an advance on the Help to Buy ISA, which does not offer the same bonuses and is restricted on the value of house it can be used to buy," Massey continued.
"It is very welcome that the government is encouraging saving and the LISA offers generous bonuses, but it is worrying if people are going to ditch pension saving in favour of LISAs."
This comes after it was found last month that only 21% of UK employers incentivise good pension saving with total contributions of 15% or more, while average workplace pension contributions are just 6%.
"Pension savings attract tax relief and employers are duty bound to top up contributions," Massey added.