From April 2017, the new Lifetime ISA will be launched. It is designed to help those aged between 18 and 40 to save for a new home, or for their retirement.
This new scheme will see the government provide a bonus of 25% on yearly savings of up to £4000, until the saver’s 50th birthday. This could mean an extra £1000 for every £4000 saved annually from the age of 18 to 50. In this case, savers who invest the maximum contributions of £128,000 could receive a maximum government bonus of £32,000.
This can be used to purchase a first home worth up to £450,000 anywhere in the UK, or save towards retirement. Savers will be able to withdraw savings tax-free if they are buying a first house for under £450,000 or if they are withdrawing the money after their 60th birthday. The funds can remain invested after the savers 60th birthday, and any interest and investment growth will be tax-free. The money can be withdrawn earlier (for something other than the purchase of a first home) however, the government bonus will be lost and a 5% penalty will be levied.
You can read the government factsheet here