Lisa - the last nail in the Isa coffin

As it stands, high earners are limited to a £10,000 personal pension contribution in 2016/17 but many who wish to make a start or supplement their pension pot or indeed save for their first home may well want to have a keen eye on the alternatives now on offer.

With the Chancellor addressing this Budget as one for the “next generation” the introduction of the Lifetime Isa (Lisa) does indeed appear to tick the box.

From April 2017, those aged between 18 and 40 can open a Lisa account and save up to £4,000 a year with a carrot of a 25 per cent bonus from the government on the savings put in before they reach their 50th birthday.

An individual who contributes the £4,000 maximum each year can therefore expect a bonus of £1,000 at the end of each tax year, which over the long term this could yield a sizeable savings pot.

As with current Isas, contributions are made out of post-tax income but investment growth on savings and future withdrawals are tax-free.

In terms of saving for retirement, the idea is to keep the fund until after 60 years of age as it can then be withdrawn tax-free. If the money is withdrawn before 60, then the government bonus is lost together with any interest earned on the bonus element; to add insult to injury, there will also be a 5 per cent penalty.

Clearly the plan would be to keep funds in for the long term and to have the account as a part of a retirement strategy plan.

Many may give this some serious thought as the Chancellor seems determined to press ahead with Isas being the way forward in term of pension saving and could well scrap the current personal pension regime further down the line.

The Isa route may well become an increasingly popular option when planning a retirement saving strategy

For those saving for a deposit on their first home, the Lisa can be used to buy a first home at any time from 12 months after the account is opened.

Accounts are limited to just one per person however joint first-time buyers can each have their own account and both receive the bonus toward the house purchase.

The plan is limited to a home worth up to £450,000 which should cover a property purchase outside the capital but for those wishing to settle in London, they will find it a struggle based upon current property prices.

Those already saving by way of a Help to Buy Isa can transfer these savings into a Lisa or continue to use both however only the bonus from one of these accounts can be used for a house purchase.

For the first time buyer the Lisa offers a real incentive to help achieve the goal of home ownership, however, they do need to work through the figures. The average deposit needed by a first time buyer is currently around the £35,000 mark, this will be appreciably higher if the property is in London.

A young couple deciding on a Lisa, saving a maximum of £4,000 each will take approximately 3.5 years to achieve this, by which time house prices may well have shifted upwards making the purchase tantalisingly near but perhaps still out of reach.

From April 2017, the annual limits for Isa contributions generally will be increased from the current £15,240 to £20,000. Any contributions to a Lisa must be within the overall £20,000 limit.

This is nevertheless a sizeable leap enabling say, a couple to save £40,000 in a tax-free environment. By hiking up these limits and with the potential threat of the government abandoning personal pension incentives, the Isa route may well become an increasingly popular option when planning a retirement saving strategy.

The Chancellor made some bold moves with the introduction of the Lisa and the evolution of savings plans generally whether this is for retirement planning or for first-time buyers saving for their deposit.

As always, the precise details will emerge once the dust settles and indeed, it will be interesting to see whether these incentives are sufficient to entice 20-somethings into the long term saving the Chancellor envisages.

Andrew Shaw is partner for Kingston Smith