Budget 2016: New Lifetime Isa for homebuyers and retirement
Millions of adults under 40 will be able to use a new Individual Savings Account (Isa) to buy a home or a pension, the chancellor has announced.
The Lifetime Isa will be launched in April 2017, and savers will receive a 25% bonus from the government.
They will be able to put in up to £4,000 a year, with the annual bonus of up to £1,000 paid until the age of 50.
And from April 2017 all savers will be able to put up to £20,000 a year into Isas, up from £15,240 at the moment.
So it will be possible to have both a standard and a Lifetime Isa, subject to the £20,000 limit.
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The chancellor said that savers would be able to withdraw money from a Lifetime Isa at any time, and would not pay any tax on it.
Those wanting to use the money to buy a home will be able to do so after just a year; those wanting to use it for retirement will have to wait until the age of 60.
Investors will be able to put their money into either a cash, or a stocks and shares Isa.
Savers who have already taken out a Help to Buy Isa will be able to move their money into a Lifetime Isa.
If they have both types of Isa, they will only be able to use the bonus from one of them to buy a home.
The Help to Buy Isa scheme, which is slightly less generous than the new Isa, is due to end in November 2019.
'Free top up'
Those using the Lifetime Isa to buy property can spend up to £450,000 on a home, but they have to be first-time buyers.
The government said savers would be allowed to withdraw money in the event of "other life events", such as a terminal illness.
But those just wanting to take money out for other reasons will not qualify for the bonus. They will also have to pay a 5% charge.
"The Lifetime ISA is a fantastic boost for anyone under 40 who's fighting the growing cost of getting on the property ladder," said Hannah Maundrell, editor-in-chief of Money.co.uk.
"It's not quite so appealing if you already own a house, as your cash will need to be tied up until you're 60 to get the free top-up."