The consultation, in early 2026, will examine whether a new, simpler Isa could be set up to help first-time buyers purchase a property.

The document added: “Once available, this new product will be offered in place of the Lifetime Isa.”

Quilter tax and financial planning expert Rachael Griffin said: “At long last, the government has conceded that the Lifetime Isa is a confused product in desperate need of simplification.

“As it currently stands, the Lifetime Isa has attempted to serve two distinct goals – saving for retirement and saving for a first home – but has failed to meet either effectively. While the 25% government bonus has been undeniably popular, the product itself has carried serious flaws and the withdrawal penalty has punished savers at a time when they have faced significant financial strain.”

Earlier this year the Treasury select committee was reviewing whether the hybrid savings product should be revamped, left unchanged or scrapped altogether.