Budget 2016: Lifetime ISA introduced

Britons under the age of 40 will be able to save up to £4,000 a year into a new Lifetime ISA from next April with every £4 saved being matched with £1 from the government.

Britons under the age of 40 will be able to save up to £4,000 a year into a new Lifetime ISA from next April with every £4 saved being matched with £1 from the government.

Speaking in today’s Budget statement Chancellor George Osborne revealed that the money saved – up to the age of 50 – could be used to fund retirement or a deposit for a home.

He said: “From April next year I am going to increase the ISA limit from just over £15,000 to £20,000 a year for everyone.

“And for those under 40, many of whom haven’t had such a good deal from the pension system, I am introducing a completely new flexible way for the next generation to save.

“You don’t have to choose between saving for your first home, or saving for your retirement.

“With the new Lifetime ISA the government is giving you money to do both.”

Osborne claimed that for the basic rate taxpayer the tax breaks offered the equivalent of tax-free savings into a pension and unlike a pension savers won’t pay tax when taking money out in retirement.

He added: “For the self-employed, it’s the kind of support they simply cannot get from the pensions system today.

“Unlike a pension you can access your money anytime without the bonus and with a small charge.”

He confirmed plans to consult with the industry on whether, like the American 401K pension plan, savers can return money to the account to reclaim the bonus “so it is both generous and completely flexible”.

He also confirmed that those who have already taken out a Help to Buy ISAs will be able to roll it into the new Lifetime ISA – and keep the government match.