The Savings (Government Contributions) Bill 2016-2017, which will legislate for the Lifetime individual savings account (Lisa), has been introduced to the House of Commons.
The Lisa was unveiled by former Chancellor George Osborne in the March 2016 Budget. The savings vehicle aims to help young people save for their first home or retirement.
Individuals will be able to save up to £4,000 a year in to the Lisa and receive a 25% government bonus when funds are put towards the purchase of a first home or withdrawn for use in retirement after the age of 60.
Although savings can be withdrawn for alternative purposes, they will not be eligible for the government bonus and there will be an additional 5% charge.
The bill confirms that the only occasions where withdrawals will be exempt from charges are when a first home is purchased, after the individual has reached a specified age, in the case of a terminal illness, upon the individual’s death, or when transferring funds to another Lifetime Isa.
The Lisa is due to be introduced in April 2017.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “The Lifetime Isa presents an opportunity for investors to both save for their first home and for their retirement within one product. It is good news for investors that the government has chosen not to delay the launch of the Lifetime Isa, [because] we know investors are keen to take advantage of it.
“We are also pleased that the government has chosen to keep the product as simple as possible, with penalty-free withdrawals limited to first house purchase, withdrawals after age 60 and terminal illness. More complexity would only have added to the costs paid by investors.”
Steven Cameron, pensions director at Aegon, added: “The publication of this bill confirms that the government is sticking with its timetable of allowing Lifetime Isas from next April. It also firms up on government intentions for various aspects of the product design, including the 25% government bonus on contributions up to £4,000 each year but full details have not yet been provided, meaning an April launch remains highly challenging.”