He confirmed that from April 2017, people can save up to £4,000 each year and receive a 25% additional bonus from the Government.
However many in the pensions industry have raised concerns that the product could cause become a threat to auto-enrolment and even signal "the beginning of the end of traditional pensions".
Former pensions minister, Steve Webb, said:
"Just at the point that millions of under forties have started pension saving for the first time, the Chancellor has set up a rival product which risks causing mass confusion. Young savers who opt out of pensions in favour of a lifetime ISA lose the contribution from their employer and the chance to build a tax-free lump sum from a pension pot - how will they know which is right for them? Young workers have had some of the lowest opt-out rates when they have been enrolled into workplace pensions, yet the Chancellor's desire for a shiny new initiative could undermine the huge progress which has just been made in ensuring young workers have savings for retirement.”
Jon Gwinnett, product technical manager at Nucleus, stated that "pensions still offer greater potential for total savings - the difference between TEE (taxed, exempt, exempt) and EET, (exempt, exempt taxed)".
Yet Dean Mirfin, Technical Director at Key Retirement, said that the ISA could "be yet another barrier to pension savings".
Mirfin commented:
"At a time when auto-enrolment is engaging well with younger workers could this pose a direct threat to the one thing the government has worked hard to create - a workforce focussed on a secure retirement."
Andy Cumming, Head of Advice at Close Brothers Asset Management, said that Osborne has "fired the starting pistol for the beginning of the end of traditional pensions".
However he added that "it will be crucial that individuals are educated about the relative merits of both traditional pensions and the scheme, lest we see auto-enrolment opt-out rates climb".
He continued:
"This ISA should be seen as an extra weapon in the arsenal of savers, not a direct replacement for the DC pension at this point in time.
“It’s highly unlikely that this is the end of pension reforms. The EU referendum may have prevented further raids on pension tax relief, but now there is a new long-term savings vehicle on the block, pension scheme members may brace for further changes in the Autumn Statement and beyond.”
