The UK government's flagship savings scheme is in chaos on the day it launches

Chancellor of the Exchequer George Osborne speaks at St David's hotel, Cardiff Bay during his visit to Cardiff in Wales.Ben Birchall / PA Wire/Press Association ImagesThe LISA scheme was the brainchild of former chancellor George Osborne.

LONDON — The government’s flagship savings programme, the “Lifetime ISA,” was thrown into chaos on the day it launched as not a single bank or building society picked up the scheme.

Nationwide said the scheme was too complicated, RBS said that it preferred the existing Help to Buy ISA, and Lloyds told the BBC that it was a “longstanding advocate of the simplicity of Isa wrappers” — hinting the LISA was too complicated.

Only three providers have any plans to pick up the scheme — Hargreaves Lansdown, Nutmeg, and the Share Centre — which are all investment platforms who will operate a stocks-and-shares option on the scheme.

The LISA account, announced in former Chancellor George Osborne’s budget last year, can be opened by anyone aged between 18 and 30. Savers can put away up to £4,000 a year and receive a government bonus of up to £1,000 a year on their contributions until they turn 50. Funds can be withdrawn tax-free to buy a first home or a pension.

There is a big catch, however. If savers want to withdraw their money early, they would have to pay a 25% charge on their pot. That is intended to recoup the government bonuses that have been paid, but in reality it means that savers will dip out on any investment or interest growth their money would otherwise have collected.

Former pensions minister Baroness Ros Altmann has called for the LISA to be scrapped for that reason.

She told Money Marketing: “I would love to see the Lifetime Isa scrapped. The Lifetime Isa is by definition not going to last a lifetime because it’s an Isa, and because you can get the tax-free money too soon.”

Some banks are still considering introducing the scheme.

A Treasury spokesperson told the Telegraph: “We have always been clear that the Lifetime Isa is not a replacement for a pension. We fully expect the provider market to grow throughout the year as providers put their systems in place and develop their products.”

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