Lifetime ISA bonuses will be paid monthly from April 2018 and annually until then, the Treasury announced in its recent LISA technical update.

The Treasury confirmed that the bonus will be based on the contribution, not on the value. For example, a £4,000 contribution to a stocks and shares LISA will receive a £1,000 bonus, even if the value has fallen or risen in the interim.

Furthermore, there will be a 25 per cent penalty on the value of a withdrawn amount, if it is not after the age of 60, for a first property purchase or in the event of a terminal illness.

Dissimilar to the Help to Buy ISA, the bonus will be available for exchange of contracts and not for completion.

LISA savers have been pre-warned that the bonus for 2017/18 is unlikely to be paid for a few months after April 2018. It is encouraged, advised, that those wanting use their LISA value and bonus for property purchase use it before April or after June to avoid disappointment.

The LISA cannot be used for house purchase for the first 12 months.

The door has been left open for borrowing from LISA, the Treasury confirmed.

Hargreaves Lansdown chartered financial planner Danny Cox said: “Making the LISA values plus bonus available at exchange of contracts will help first time buyers’ cash flow and it is a better system than the Help to Buy ISA as the cash will be ready when needed. First time buyers need to take into account the timetable for the first annual bonus in their planning otherwise they risk a shortfall at exactly the wrong time.

“We expect considerable interest from the 500,000 or so Help to Buy ISA holders, looking to transfer their values across to LISA in 2017/18. This will give them wider choice, the benefit of stocks and shares options, higher subscription levels and bonuses paid sooner.

“There remains opportunities for a simplification of the ISA range which would help simplify savings decisions and should lead to higher savings rates.”

TISA technical policy director Jeffrey Mushens added: “This is good news for those consumers who are eligible for the LISA as it means they will be able to benefit from a significant government bonus towards a first property purchase and a retirement pot.

“We look forward to continuing to work with HMT on improving the scheme even more and will continue to encourage the abolition of the additional exit charge, alongside the extension of the lifetime events that would qualify for a penalty free withdrawal. We believe both measures are in the consumer interest and will enhance the popularity of the LISA.”

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