As of today, the much-anticipated Lifetime ISA (LISA) has launched allowing individuals to save into a longer-term tax-free account and attracts a government bonus.

It was first introduced by the then Chancellor, George Osborne in the 2016 Budget, and to mark its launch, the Q&A below summarises the key points of the LISA.

Is the LISA the same as an ordinary ISA?

As with ISAs, you won’t pay tax on any interest, income or capital gains from cash or investments held within a LISA. LISAs can also be held in cash, stocks and shares investments, or a combination of both.

Who’s the Lifetime ISA scheme for?

This new kind of ISA is aimed at young people (those aged 18 and under 40) to help them buy their first home and save for retirement at the same time.

What can you save under the LISA?

You can put in up to £4,000 each year, until you’re 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. This means savers can put away a total of £128,000 which is matched by a maximum government bonus of £32,000. There’s no maximum monthly contribution; you can save as little or as much as you want each month as long as you don’t exceed the £4,000 a year limit.

When is the bonus paid?

In the 2017/18 tax year, the bonus will be added at the end of the tax year, while from 2018/19, the bonus will be paid on a monthly basis.

What do I need to know if I’m buying my first home?

Your savings and bonus can only be used to buy your first home which must be located in the UK and cost no more than £450,000. The money can be used at any time from 12 months after opening a LISA account. Accounts are limited to one per person rather than one per household but if you’re buying with a partner or friend who is also a first-time buyer, you can both receive a the bonus individually.

The rules also stipulate that you need to buy with a mortgage and you need to use a conveyancer or solicitor to act for you in the purchase. This is because the ISA provider will pay the funds directly to them.

What about if I’m using the LISA for later-life saving?

As above, you can continue saving into a LISA until you reach the age of 50 and you can access the money penalty-free from the age of 60.

What if I need to access my money earlier?

A 25% government charge on ‘unauthorised withdrawals’ from LISA is applied, except in the following circumstances: where the saver’s over 60, bought their first property when under the age of 40 or in the event of terminal illness, with less than a year to live. It’s important to note that this 25% charge is on the whole amount, including on the government bonus and investment growth.

In the first year of the LISA – 2017/18, there will be no government charge for withdrawals but savers will not receive the government bonus.

Where can I open a LISA?

Currently there are only three investment platforms offering a LISA at launch – Hargreaves Lansdown, Nutmeg and The Share Centre. There are no cash versions available yet, however Skipton Building Society announced that it is set to offer a LISA in June. Savers opting for an investment LISA will need to take account of platform fees and that they can lose their money too if the performance dips.

The LISA alongside other ISA products

The LISA limit of £4,000 counts towards your annual ISA limit which has from today increased to £20,000 for the 2017/18 tax year.

If you have a Help to Buy ISA, you can transfer those savings into your Lifetime ISA or you can continue to save into both – but you’ll only be able to use the bonus from one to buy your first home.

See YourMoney.com’s First-time buyer: Should I transfer my Help to Buy ISA to the Lifetime ISA? for more information.