The government is introducing a new Lifetime ISA for people under the age of 40.

Accounts will be available from April 2017. People can save up to £4,000 each year, and receive a government bonus of 25%. They can use some or all of the money to buy their first home, or keep it until they’re 60.

There is no maximum monthly contribution, up to £4,000 a year. The total amount you can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017

Savings and the bonus can be used towards a deposit on a first home worth up to £450,000 across the country.

Accounts are limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together

If you have a Help to Buy: ISA you can transfer those savings into the Lifetime ISA in 2017, or continue saving into both, but you will only be able to use the bonus from one to buy a house.

After your 60th birthday you can take out all the savings tax-free. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 5% charge.

Jon Gwinnett, product technical manager at Nucleus, said: “The lifetime Isa looks to be a reaction to the need to encourage the young to save for their future and we welcome this pragmatic solution. It makes savings easier to access for many, and will hopefully help encourage the savings habit.

“It may be seen as the first step on the road to a pension Isa for everyone, but pensions still offer greater potential for total savings  – the difference between TEE (taxed, exempt, exempt) and EET, (exempt, exempt taxed).”