Tory saving scheme to help buy a home

David Cameron's government would create "lifetime savings accounts" to help individuals at crucial stages in their working lives, not just in retirement.

They could withdraw money from their accounts to pay for a deposit on a home - usually the greatest hurdle in getting on the housing ladder.

Money from the fund could also be used to pay for training courses to increase their skills and earning power.

The move will be outlined this week in a Tory policy report on improving economic efficiency from a group led by former Cabinet minister John Redwood.

Mr Redwood said only firsttime buyers with 'rich dads and rich grandads' were able to pay the typical 10 per cent deposit of nearly £20,000 on an average priced home.

People would be able to make regular contributions to the Lifetime Savings Account, or LSA, which would be similar to the current tax-free Individual Savings Account.

But unlike an ISA there would be a higher limit on the annual amount that could be saved taxfree, meaning it would act more like a long-term pension fund.

Money withdrawn would have to be put back over an agreed period and could be used only for a first home or training course beyond normal schooling.

Mr Redwood said people would be more likely to save for their retirement from a younger age if they could see the benefits within a few years.

He told the Daily Mail: "In your twenties it is years before you retire but you are more likely to save to buy a house.

"At the moment people can get help from their rich dads and rich grandads to pay for a deposit. We want to help people who don't have rich dads and rich grandads. We want to get people into the savings habit early because there is not a lot of saving going on at the moment."

The Government would not contribute directly into an LSA and the state pension would still exist but the benefit would be from the account's tax-free privileges, Mr Redwood said.

The LSA would also be free of capital gains tax on investments sold within the fund and allow taxfree withdrawals to buy a pension annuity or to make pension payments.

Mr Redwood added: "These schemes will give people more flexibility in planning their lifetime needs.

"Whilst accumulating enough money to allow a comfortable retirement is the main aim, people also need help with buying their first home and with gaining the skills they need to get a better job."

A Conservative government would also take steps to save more final-salary pension schemes and would scrap the maximum age to begin drawing down a pension.

Plans in the report to cut £14 billion of business red tape have already been unveiled.

The report is not yet Conservative policy but Shadow Chancellor George Osborne has welcomed its broad thrust.

However, the document will also question Mr Cameron's green policies by calling for a massive road-building programme, expansion of airports and more nuclear power stations.

A party spokesman said Mr Redwood had been encouraged to look at energy and competitiveness and that a separate policy group on enhancing quality of life was likely to support more environmentally friendly measures.