Britons aged between 18 and 40 will be able to apply for a Lifetime ISA account when the new tax year begins in a week’s time on Friday April 6.
Lifetime ISA holders, who are either saving for retirement or their first home, will also receive a government bonus of 25% on any savings put into their account.
In many ways the new Lifetime ISA is very similar to the Help to Buy ISA which was launched in December 2015 and aims to get first time buyers on the property ladder.
Danny Cox, a chartered financial planner at Hargreaves Lansdown, said: “Progressively rising house prices have made it increasingly difficult for young people to buy their first home.
“The Help to Buy and Lifetime ISA give hard cash incentives to support that important first step onto the property ladder.
“Over 500,000 Help to Buy account holders should be considering their option to transfer to a Lifetime ISA. With the right planning this could increase their deposits and help them to get onto the housing ladder more quickly.”
If you plan to buy a property before April 2018 keep your Help to Buy ISA because a Lifetime ISA has to be in force for 12 months before any bonus is paid.
But if you are saving for the future, here are seven reasons you should consider your money from a Help to Buy ISA, according to Mr Cox.
1. Save more sooner
“In a Help to Buy ISA you can contribute up to £200 each month (with the exception of the first month when you can contribute £1,200).
“In a Lifetime ISA you can contribute up to £4,000 a year, with no restrictions on when or how you invest: lump sum, monthly, or a combination of both.”
2. Greater potential bonus
“With both the Help to Buy ISA and Lifetime ISA, the government adds 25% to your savings.
“At up to a £1,000 a year you could receive a greater bonus from a Lifetime ISA in just 13 months than a Help to Buy ISA.”
3. Bonus paid earlier
“The Help to Buy ISA bonus is 25% of the closing balance of the…