A Lifetime Isa to help the younger generation save for their first home and their retirement in the same pot has been unveiled by the Government.
The new accounts, set to be available by April 2017, can be opened by people aged between 18 and 40 years old and any savings they put in before their 50th birthday will receive an added 25% government bonus.
This means 25p will be added by the Government for each £1 put in by the saver up until the age of 50.
Some experts suggested the new scheme heralds the introduction of a "pension Isa by stealth", and will mean future generations increasingly favour Isas - which are built up from taxed income - over pensions - which are only taxed when the cash is withdrawn.
The new scheme will mean that over their lifetime, savers putting £128,000 away will be able to get a government bonus of up to £32,000, plus any growth on their investments.
A Treasury spokesman said the Lifetime Isa is a "radical new way for the next generation to save".
He said : "It is designed to address the choice that people who are 30 or 40 face in terms of having to choose between saving for a first home and saving for retirement."
The scheme will mean savers can put in up to £4,000 a year, and receive a government bonus of 25% - or up to £1,000 a year. People can save as much or as little as they want each month.
Savers can use some or all of the cash towards a deposit for a first home, worth up to £450,000 across the country. The accounts are limited to one per person rather than per home, so two first-time buyers purchasing a property together can both receive a bonus.
Aspiring home buyers who are already saving into the recently-launched Help to Buy Isa will be able to transfer their savings into the Lifetime Isa in 2017. They can continue saving into their Help to Buy Isa if they want to, but they will only be able to use the bonus from one account to buy a house, the Government said.
Savers can also use the new Lifetime Isa to save for their retirement and take all of their savings tax-free after their 60th birthday.
People can withdraw the money at any time before they turn 60, but they will lose any government bonus as well as any interest and they will also have to pay a 5% charge.
But if someone were diagnosed with terminal ill health they would be able to take the cash out, including the bonus, tax-free, regardless of their age.
The Government said it will also explore whether savers should be able to access their contributions and bonus for other specific life events.
The announcement comes after the Chancellor recently moved away from an idea to make pensions more like Isas. That idea would have meant that money put into pensions was taxed up-front but withdrawals would have been tax-free.
Martin Lewis, founder of MoneySavingExpert.com, said: "The real cleverness behind this for the Treasury is that if people use this rather than a pension, as it comes from taxed income, it gets the revenue now.
"If they put it in a pension, the revenue has to wait years until it gets tax. So, this could be Mr Osborne cleverly grabbing cash out of a future chancellor's pocket."
Philip Smith, pensions partner at PwC, said: "Market forces are now likely to drive more younger savers towards Isas and away from pensions, a trend that will be accelerated if the Chancellor goes ahead with the type of flexibility offered in the US that allows savers to withdraw savings and repay later.
"It's interesting that older savers have not been included in the new Lifetime Isa. This may point to a future dual track system, leaving the current pension system in place, but introducing the pension Isa by stealth. Once the market beds down, a change to a fully fledged pension Isa becomes much easier."
The Government said savers will be able to contribute to one Lifetime Isa in each tax year, as well as other types of Isa, up to a new overall annual Isa saving limit of £20,000. The total amount that someone can save into Isas in any one year will increase from £15,240 to £20,000 from April 2017.