The number of savers with Lifetime Isas jumped by 45 per cent in the year to April 2019 compared to the previous tax year, official figures show.
Data from HM Revenue & Customs show that 69,000 Lifetime Isas were opened in the 2019/19 tax year taking the total from 154,000 to 223,000.
The total amount saved in Lifetime Isas grew by £118m year on year from £486m to £604m.
The savings accounts were launched in April 2017 and can be opened by 18-39 year olds.
Savers can pay in up to £4,000 a year and receive a £1,000 annual top-up from the government up until they reach 50.
Like standard Isas there are both cash and stocks and shares versions of the product, but there is less flexibility when it comes to withdrawing money.
Savers must put their money towards buying their first home or else wait until they turn 60 and use the funds towards their retirement, otherwise they will be hit with a 25 per cent penalty on any withdrawals.
As a result of the Covid crisis, the government is waiving this charge on withdrawals until April 2021 to give those in financial difficulty the chance to access their savings penalty-free.
Investment firm EQi’s director Richard Pearson says: “This is a huge jump in both the number of savers and the amount of money being saved in a Lifetime ISA, in what is only the product’s second full year.
“The 25 per cent government bonus clearly provides the real incentive here, but this is still a relatively complex product with lots of caveats, so it is not suitable for everyone.
“The growing uptake shows that people are not only keen to make their money work as hard for them as possible, they are also saving with a purpose in mind – their first home or towards their retirement.
“These are crucial behaviours to encourage, particularly in the current roller-coaster economic environment.
“EQi’s own figures show that the LISA has a growing appeal with younger investors.
“Of the people who have taken out our new Lifetime ISA since it was launched in March, 29 per cent are aged 30 or younger.
“Not only is it a valuable way to save, it’s a perfect way for people to start their investment journey.”
