SAVVY savers can boost their pension pot by £40,000 by putting their cash into a Lifetime Isa.

AJ Bell, the investment platform, has revealed a trick that could help some Brits boost their retirement fund by thousands of pounds.

What is a Lifetime ISA?

Anyone between the ages of 18 and 40 can open a Lifetime ISA to save for buying a first home or to put money away for retirement.

You can put in a maximum of £4,000 a year until you're 50, with the government paying in an additional 25% bonus – or £1,000 annually.

After you turn 50, you can't pay into your ISA or earn the 25% bonus, but your account will stay open and your savings will still earn interest or investment returns.

Savers are able to withdraw money from their ISA if they are buying a home, over 60, or terminally ill with less than 12 months to live.

But you’ll pay a 25% charge if you withdraw money or transfer the Lifetime Isa to another type of Isa before 60.

How to get an extra £40,0000

Tom Selby, head of retirement policy at AJ Bell, said: "People using a Lifetime ISA for retirement saving could have the opportunity to get'double bubble' on their bonuses when they reach their 60th birthday."

"Lifetime Isas benefit from an upfront bonus of 25% on subscriptions up to £4,000 a year – meaning an annual £1,000 in free money is up for grabs.

"What's more, savers can access the money without any government withdrawal charge or tax penalties from their 60th birthday."

For example, an 18-year-old paying the maximum amount into a Lifetime Isa – with a 4% annual investment growth – could have up to £483,000 by the time they're 60.

They could then reinvest up to £32,000 a year of this cash in a self-invested personal pension, benefiting from £8,000 a year in basic-rate pension tax relief.

If they continued to do that for five years – to their 65th birthday – that £8,000 annual tax relief will add an extra £40,000 to their pension pot in tax relief alone, according to AJ Bell research.

However, before you make the jump, you should work out whether a Lifetime Isa right for you.

If you're eligible for a workplace pension, you should prioritise that as your employer will also contribute – helping you to save more.

In that case, a Lifetime Isa would be in addition to your workplace pension.

The benefits of using a Lifetime Isa for your pensions savings also depends on which tax bracket you're in.

If you are a higher or additional-rate taxpayer, the tax relief available from a pension – at 40% or 45% – is significantly higher than the 25% upfront Lifetime Isa bonus.

But it could be a good option for basic-rate taxpayers due to the combination of an upfront bonus and tax-free withdrawals from age 60.

However, it is also possible that the government will change pension or Isa rules between now and your 60th birthday.

This means there is no guarantee that following this method will earn you £40,000.

Tom added: "However, you can only plan with what is in front of you today and the Lifetime Isa is a very tax efficient way of saving anyway.”

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