The government puts in a 25 per cent bonus each year, up to a maximum of £1,000.
You can take money out if you are is buying a home, or withdrawing for a pension.
Mr Connolly says: “The focus for many will be on saving to buy a property.
“This is an aspiration for many young people, but can also seem like a distant dream with property prices in many areas out of reach of those without high salaries or financial support from their parents.
“The [Lisa] allows people to save up to £4,000 each year and benefit from a 25 per cent government bonus, which is very generous.”
National Savings and Investments premium bonds
A lesser known form of tax-efficient savings are NS&I premium bonds. While some might consider it a form of gambling, premium bonds allow people to invest up to £50,000 into the ‘prize draw’ and then hope to get a premium – which can vary from £25 to £1m, all of which is paid tax-free.
Each £1 is counted as a unit that goes towards being entered into the draw, and NS&I says that each £1 has a 24,500-to-one chance of winning some ‘interest’.
So it therefore pays to invest more with the institution, and also means that the bonds work completely differently to conventional savings accounts.
Tom Adams, head of research at Savingschampion.co.uk, says: “For many it’s a nice, straightforward savings account to use. Some people may argue that as interest rates are historically low, the gamble is less.
“The amount of money they would get in a savings account as interest is variable and the rates can change, and you will get some interest each year.
“You’re taking more of a gamble with a premium bond, and if you get regular prizes you get a regular return.”
The bonds do allow easy access.
SEIS
The seed enterprise investment scheme is similar to the EIS, but the companies being invested in are at an even earlier stage of development.
This means the tax benefits are greater, so that you get 50 per cent income tax relief, as opposed to 30 per cent and this can be received in the tax year the investment is made.
An investor can only put in a maximum of £100,000 a year, which can be spread over a number of companies.
However, these investments are very risky and so should only be used by sophisticated investors – the company must be no more than two years old.
AIM shares
Anyone wanting to mitigate their IHT bill can invest in AIM shares. These will be exempt from IHT if held for more than two years, as they qualify for business property relief.
