The UK government has just announced in its 2016 budget that it will be launching subsidised Lifetime Individual Savings Accounts that will allow people under 40 to save for their first home and retirement.
The initiative follows a raft of other measures designed to open up the UK savings system including the introduction of auto-enroll pensions in 2012, pension choice in 2014 and significant increases in the other pension plan contribution limits.
The UK Lifetime ISA scheme is loosely modeled on similar schemes in the US and benevolent schemes that operate throughout Asia.
"The government wants to help young people save flexibly for the long term and ensure they do not have to choose between saving for retirement and saving for their first home," notes the official budget papers.
Lifetime ISAs will enable any adult under 40 to save up to £4,000 (A$8,000) each year which will be supplemented by a 25% bonus from the government.
Britons can continue making contributions up to age 50. While the scheme is designed to help people save for their first home, account holders can withdraw money at any time for any other purpose although the bonus paid on that portion will have to be refunded to the government.
Money in the account after the saver reaches age 60 can be used to boost their retirement savings with no penalty.
The UK budget papers explain that the government will set the limit for property purchased using Lifetime ISA funds at £450,000 (A$900,000) that will apply across the UK.
The UK government said it will also explore with the financial sector options for enabling Lifetime ISA savers to borrow against their account balance without incurring a charge provided the loan is fully repaid.
During the 2017-18 tax year, people who already have a Help to Buy equity loan and mortgage guarantee account will be able to transfer their savings into the Lifetime ISA and still have access to the 25% bonus if their contribute another £4,000.
There are currently 350,000 Help to Buy accounts and 45,000 people have so far used them to buy their first home.
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