IT IS less than a week until the new Lifetime ISA (LISA) launches and so far only a handful of providers have said they will offer one.

Hargreaves Lansdown, Nutmeg and the Share Centre were among the first to embrace the new product, with Scottish Friendly this week unveiling its plans to also enter the fray.

The Glasgow-based mutual said its take on the LISA is unique as it will offer savers the chance to save into a Scottish Friendly My Choice ISA first before switching them into a LISA, where they will benefit from a 25 per cent Government bonus, when they are ready to lock their money away.

Commercial director Neil Lovatt said: “I worry that, for those investing under £4,000 a year, a direct investment in a Lifetime ISA is flawed. For the vast majority of these customers there is just no need to rush into a LISA - going in early only cuts these customers off from their money with no financial benefit.

“It’s often far better for them to use their ISA allowance and later withdraw and transfer it into a LISA when they are good and ready. You have to ask why would any such customers follow a LISA-first strategy?”

But what exactly is a LISA and what are its benefits and drawbacks?

:: Am I eligible for the Lifetime ISA?

To open a new Lifetime ISA, you must be aged 18 or over, but under 40.

:: How much can be saved into the Lifetime ISA?

Savers can put in up to £4,000 per tax year and they can put in as little or as much as they want. Contributions into a Lifetime ISA will count towards the maximum annual ISA limit. The new limit for the 2017/18 tax year is £20,000.

You can continue to pay into a Lifetime ISA until you reach the age of 50. The account will stay open after then, but you cannot make any more payments into it or withdraw the money until you are 60.

:: What about the bonus?

Savers will receive a 25 per cent bonus on the amounts paid into a Lifetime ISA. So someone paying in the maximum of £4,000 per year would receive a tax-free bonus of £1,000 that year.

Over their lifetime, savers will be able to make maximum contributions of £128,000 matched by a maximum bonus of £32,000.

:: What can I use the Lifetime ISA for?

These accounts are intended to help people save for their first home or their retirement in one savings pot.

You can withdraw the funds to buy a first home without any penalty otherwise the cash must remain locked away until you are 60.

For first-time buyers, the home you buy must be in the UK, have a price of £450,000 or less, be the only home you will own, be where you intend to live, and be purchased with a mortgage.

Two first-time buyers can club together to put their Lifetime ISAs towards a home - but the £450,000 price cap still applies to the whole property.

If you are buying a house with someone else who is not a first-time buyer, they will not be able to use their Lifetime ISA without a withdrawal charge.

:: I've already saved into a Help to Buy ISA for first-time buyers. Can I save into a Lifetime ISA?

Yes. In the tax year 2017/18, you can transfer the full balance of your Help to Buy ISA, as it stands on April 5 2017, into your Lifetime ISA without affecting the £4,000 limit.

You can also choose to save into both schemes - but you can only use the bonus from one to buy a house.

:: What if I want to take cash out before the age of 60 for a reason other than buying my first home?

If a saver becomes terminally ill, they can withdraw their funds, including the bonus, without a charge. But savers withdrawing funds from Lifetime ISAs before they turn 60 for other reasons face a withdrawal charge of 25 per cent of the amount withdrawn.

:: How does a Lifetime ISA compare with a workplace pension?

The Lifetime ISA is not intended as a replacement for workplace pension saving. Millions of people are being placed into a workplace pension under automatic enrolment.

As well as tax relief, people saving into a workplace pension get the benefit of their employer also paying into their pension.