Find our best lifetime ISAs

Lifetime ISAs are tax-free savings account that come with an added bonus.

The government adds 25% to the first £4,000 you save each year. But there are conditions attached.

• Firstly, only people aged 18 or over, but under 40 can open one. Although you can keep paying in longer once you have one.

• Secondly, you only get the government bonus cash if you use the money to buy your first home, you withdraw it after you turn 60, or you’re terminally ill, with less than 12 months to live

As long as you meet those conditions, though, you can pocket up to £1,000 a year extra cash simply by saving in the right place.

Lifetime ISAs replaced help-to-buy ISAs as the government's favoured way to help people out who are saving up for their first home.

If you've never owned a home, there's not much out there that can beat them once you factor in the 25% bonus on offer.

But there are two serious considerations before you rely on them for your deposit.

1. It has to be your first home, which you are buying with a mortgage and using a solicitor or conveyancer. If you've ever owned or part owned a property or land anywhere in the world - even just a time share or on some types of caravan site - you won't be eligible for the bonus cash.

2. Secondly - there's a £450,000 limit on what you can buy. That might sound like a lot, but if you're buying with someone else, and not for a few years, you might find yourself butting up against the limit. And discovering, after you find your dream home, that the money you'd been relying on to help pay your deposit is no longer available can come as a nasty surprise.

Lifetime ISAs let you earn interest or grow money you invest with them tax free, as well as offering a 25% bonus on top of what you put away, if you wait until you're 60 to withdraw the cash.

That makes them one of the best ways to save for your retirement out there, but not a direct replacement for a private or workplace pension.

That's because workplace pensions see your boss top up your savings and can let you pay in from your pre-tax salary - saving you both income tax and national insurance - and are also largely tax-free when it comes to their growth.

Private pensions don't benefit from top ups from your boss, but still offer a 20% bonus to make up for income tax (even if you don't pay it) with people who pay a higher rate of income tax able to claim extra money back too.

But, if you're already paying into a workplace pension, a lifetime ISA has a key advantage over a private pension - you don't pay any tax when you withdraw your cash.

To make up for the tax relief when you pay into them, pensions are taxed like income when you draw money out of them. A lifetime ISA isn't, meaning you can pull as little or as much as you like out of them without losing anything to HMRC.

If you're planning to use your lifetime ISA to help pay for a first home, it makes sense to choose a cash lifetime ISA.

That's because it will let you know exactly how much money you have saved up, and that amount won't change suddenly if markets fall - something that could leave a hole in your savings just as you need to access them to pay your deposit. And if you're choosing one of those, the best LISA provider will be whoever is paying the most interest.

If you're planning on using the money after you turn 60, a stocks and shares lifetime ISA makes more sense - as you have plenty of time for your investments to grow.

Over 20 years (the smallest amount of time between opening your lifetime ISA and being able to access it penalty-free without buying a house), the returns on the markets nearly always beat those on cash savings account.

In this situation, finding the best provider will depend on whether you want to choose your own investments or let a professional manage your funds for you. Having your money managed for you will generally cost you more in fees.

Alternatively, you can hold cash and stocks and shares in your Lifetime ISA, as you can have a combination of both.

If you decide to take money out of your lifetime ISA before you're 60 for any reason apart from buying your first home - the government will take 25% of money you withdraw.

But while that sounds like it's just them reclaiming the bonus - it will actually cost you more than the government added in the first place.

The easy way to explain this is with an example.

• If you pay in £800 - the government adds a quarter to it. Meaning you get an extra £200 and your lifetime ISA has £1,000 in total.

• If you then withdraw that £1,000, the government takes a quarter from that new - bigger - amount. So £250 is taken back.

• You're left with £750 - £50 less than you paid in in the first place.

• Any growth or interest you earn on the ISA would also be subject to the 25% penalty.

That means that while you can access your money early, unlike with a pension, doing so will mean you lose out on some of your savings.