Free money! The Government is giving out free money! Sounds too good to be true but Chancellor George Osborne's Budget contained details of a new product called a Lifetime ISA - a savings scheme that rewards with cash.
The Chancellor's introduction of Lifetime ISAs is a direct appeal to Millennials to get saving for their own property - with handsome rewards on a par with returns from stocks and shares. The new ISA also perpetuates the current Government's love of homeownership.
The best benefits are for the youngest savers - if you start at 18 and save the maximum amount, the rewards are rather attractive (£32,000 of bonuses). We think the Lifetime ISA is an exciting new product and to be rewarded with extra cash for any amount saved is a great incentive for young people.
The Lifetime ISA is going to work like this: for every £4 saved, the Government will add £1. The maximum that can be saved each year will be £4,000, earning the saver a £1,000 cash bonus.
"But isn't that similar to the Help to Buy ISA?" we hear you cry. Well, yes, but Help to Buy ISAs are due to end on 30th November 2019 and they are cash-only products, whereas the Lifetime ISAs will be offered as cash or stocks and shares. Anyone currently with a Help to Buy ISA can transfer their funds to a new Lifetime ISA when they're launched in April 2017.
The Lifetime ISA will be more generous with its bonuses than its Help to Buy counterpart - a more rewarding way to save for a deposit. Currently savers with a Help to Buy ISA can only earn a maximum of £850 in bonus cash in one year, versus £1,000 with a Lifetime ISA.
And now for the caveats. When you open a Lifetime ISA, you need to be under 40 in April 2017; the property purchase has to be your first home; you must save for 12 months before you can use any savings for a deposit and the value of the property needs to be less than £450,000.
It's worth noting that the Lifetime ISA is a dual purpose product also addressing the need to plan financially for the future. All under 40s can open a Lifetime ISA - even if they already own a property - with the purpose of saving for their retirement. The same bonuses apply but the Government will stop adding bonuses when the account holder reaches 50 and the money can only be withdrawn penalty-free when the account holder turns 60.
It will be possible to make withdrawals from Lifetime ISAs outside of the two specified milestones but this will come with a 5% charge and a loss of bonuses, unless the saver is suffering from a terminal illness.
Those wanting to use the money to buy a home will be able to do so after just a year; those wanting to use it for retirement will have to wait until the age of 60.