Most recent government data (2020-2021) shows just 553,000 adults contributed to a Lifetime ISA - either to save money towards their first home deposit or for their retirement. A LISA pays out a 25 per cent bonus on savings made up to £4,000 each tax year, allowing savers to grab as much as £1,000 of free money each year. It can be opened by adults between the ages of 18-39, with users able to pay into it until they turn 50. The money can be withdrawn to use towards a deposit for a first home or for retirement after they turn 60. You can choose between a Cash LISA or a S&S LISA, and if you were to open the account at 18 and pay in the full £4,000 every year, you could earn as much as £32,000 of free money by the age of 50. The interest earned on your LISA savings or your investing returns are also tax-free. But with just three per cent of 18-39 year olds contributing to a Lifetime ISA last year, more than 18 million eligible UK adults could be missing out on up to £18.5billion this year alone, towards their first home deposit or their retirement savings. Brian Byrnes, head of personal finance at Moneybox, which collated the data, said: “They say there is no such thing as free money, but that’s not strictly true in this case. “The Lifetime ISA was launched by the government in 2017, specifically to encourage younger people to get into the habit of saving - whether that’s towards their first home or for a more comfortable retirement. “Every day we see how invaluable the Lifetime ISA is in helping young people start planning for their future, resulting in many thousands of people being able to buy their first home far sooner than would otherwise have been possible. “So far an entire generation of first-time homeowners has benefited, with more than 118,000 homes bought with a Lifetime ISA across the length and breadth of the country. “And while the Lifetime ISA may not be suitable for everyone who is eligible for it, we believe far more could be benefiting from the fantastic government bonus than are currently doing so.” Because the product is intended to provide a boost for first-time buyers or later life savers, withdrawing money for any other reason will incur a 25 per cent penalty fee, meaning savers may get back less than was paid in. Planning for the future But Moneybox data shows that when its LISA savers made a partial withdrawal, it was for an average of £400, costing them £20 of their original savings. There is also a £450,000 price cap on any first-time property purchased with a Lifetime ISA. Brian Byrnes added: “The £450,000 property price cap has affected less than one per cent of our LISA customers. “With the average price of properties purchased by our LISA customers around £270,000, it’s clear the Lifetime ISA is working well for 99 per cent of our first-time buyers.“ A study of 2,000 adults, commissioned by the saving and investment app, via OnePoll, also found that over the last 12 months, 47 per cent of 18-24 year olds and 36 per cent of 25-34 year olds have seen their disposable income drop, making it more important than ever to make their money work as hard as they can. Although 54 per cent of both age groups have still been able to save regularly over that time. Brian Byrnes, from Moneybox, added: “Planning for the future – whether that’s buying your first home or preparing for your retirement years – has never been more important. “The cost-of-living crisis has made people want to be more financially resilient and getting the bonus cash from the Government to boost your hard-earned savings can be a great way of helping that to happen. “Knowing that people buy their first home at the average age of 32, if you were to continue saving with a LISA afterwards and are able to save the maximum amount for your retirement until the age of 50, you’d have saved £72,000 and get £18,000 in free money - with interest and investment growth on top of this. “That’s definitely not to be sniffed at.”