A new Lifetime ISA has been introduced in the Chancellor’s Budget today.

The savings scheme allows up to £4,000 a year to be saved tax-free, plus savers can see their pot boosted by a 25% Government bonus.

The innovative new scheme works like an instant-access savings account, a tax-free ISA and a long-term pension plan rolled into one. And this is good news for younger savers, put off by pensions, and struggling to save a deposit for a home.

How does it work?

From April 2017, anyone between aged 18 and 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the Government on any money deposited before their 50th birthday.

Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw some or all of it to help buy your first home (on properties costing up to £450,000).

Joint homebuyers are able to combine their accounts and Government bonuses to buy one home, plus existing Help to Buy ISA customers will be able to transfer their funds into a Lifetime ISA from next year.

There is no maximum monthly contribution – you can save as little or as much as you want, up to £4,000 a year.

You can also use the account to help you in retirement and can withdraw all of the savings tax-free after your 60th birthday.

Mark Hayward, managing director, National Association of Estate Agents, said: “The Chancellor’s announcement that a new lifetime ISA could be used to help people buy their first home is welcome news. Helping first-time-buyers (FTBs) to get on the housing ladder should be a priority for the government, limiting this to those aged 40 or under emphasises the real issues for those trying to get on the housing ladder.”