Savers will be able to put their cash into a Lifetime Isa from April now the landmark savings bill has become law.
The Savings (Government Contributions) Bill has been granted Royal Assent, meaning adults under the age of 40 can use the scheme from 6 April this year.
Up to £4,000 can be saved into the new Isa each year and savers will receive a 25 per cent bonus from the government on top.
But the Lifetime Isa, or Lisa, has been mired in criticism, with the former pensions ministers Steve Webb and Ros Altmann lambasting the new scheme.
Research published in November last year indicated there is widespread confusion about the Lifetime Isa, largely because the government’s parallel initiative requires small firms to auto-enrol employees into qualifying pension arrangements.
Some providers also urged the government to postpone the April deadline, claiming they would not be ready to offer the savings product in time.
Jane Ellison, financial secretary to the Treasury, said: “We know that there are many people who would like to save, but feel that there are barriers that prevent them from doing so.”
As well as encouraging people to save for retirement, the Lifetime Isa is expected to help hundreds of thousands of first-time buyers who are trying to get onto the property ladder every year.
Ms Ellison said the government is committed to supporting savers at all stages of their lives.
She pointed to pension tax relief, which is worth around £35bn each year, the introduction of automatic enrolment, and the pension freedoms.
The Help to Save scheme, which also comes under the savings bill and is aimed at helping people on low incomes, will be available from 2018.
Danny Cox, chartered financial planner at Hargreaves Lansdown, said he expects "considerable interest" from holders of Help to Buy Isas looking to transfer their values across to the Lisa from April.
He said the main advantages of Lisa over the Help to Buy Isa are higher subscription levels, bonuses paid every year, and the availability of stocks and shares versions.
"Isas are an incredible success story with nearly half the adult population using one to protect their hard earned savings and investments from the taxman," Mr Cox said.
"Isas come with income and capital gains tax savings, but one lesser known benefit is that Isa profits don’t have to be recorded on a tax return; particularly relevant at this time of year as we head toward the 31 January self-assessment deadline.”
