The new Lifetime Isa

Last week the Chancellor announced a new Lifetime Isa (LISA) for under-40s, allowing them to save up to £4,000 per year, with the Government adding £1 for every £4 paid in.

Provided the proceeds are used to buy a first home or withdrawn after age 60, the bonus can be kept and proceeds taken tax-free. If withdrawals are made that don’t meet these conditions, there is a 5% penalty and the bonus will be lost.

There are a number of differences between the new LISA and saving for retirement through a workplace pension. The key ones being that with a workplace pension you get both tax relief and an employer contribution; you can also save a lot more each year (up to £40,000). A LISA can sit alongside a workplace pension, but it is based on your own savings after income tax and National Insurance (NI) deductions.