The Lisa will be available from 6 April 2017 for those under 40 years-old.
It will enable individuals to save up to £4,000 a year, with the government providing a 25% top up on savings. These funds can be put towards a first home or for retirement income once the account holder turns 60.
Withdrawal for other purposes will attract a penalty after the first year of the saving vehicle’s launch.
The Savings Bill also includes the government-backed Help to Save scheme, which will become available in 2018 via National Savings and Investments (NS&I).
Jane Ellison, financial secretary to the Treasury, said: “We know that there are many people who would like to save, but feel that there are barriers to prevent them from doing so. That’s exactly why we’ve introduced two new saving schemes with generous incentives from the government.
“From April, the Lifetime Isa will help hundreds of thousands of first-time buyers aiming to get onto the property ladder every year and encourage them to save for later in life.”
Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “The Lisa will be particularly attractive to savers and investors looking to buy their first home, and to those looking to complement their existing pension plans. There are over 500,000 Help to Buy Isa accounts and we expect considerable interest from holders looking to transfer their values across to [the] Lisa from April 2017. The main advantages of [the] Lisa over [the] Help to Buy Isa are higher subscription levels, bonuses paid every year, and stocks and shares versions available.”