Govt’s Help to Save scheme gets off to slow start: are you missing out?
The government’s Help to Save scheme has only reached less than one in 40 of the low income savers it was designed to help.
The savings scheme was launched in September 2018, with the aim of helping 3.5 million eligible people in receipt of Universal Credit.
The scheme is designed to encourage individuals to get into the habit of saving money by offering 50p for every £1 saved on savings, up to a maximum of £50 a month for four years. The maximum government bonus available is £1,200.
However, a House of Commons answer to written questions has revealed that only 80,810 Help to Save schemes were opened at the end of 2018.
Becky O’Connor, personal finance specialist for insurer Royal London, said the numbers were not surprising, given the issues that claimants have had with Universal Credit itself.
“In theory it’s a good idea as people on low incomes would benefit a lot from a small savings fund, as it could help them avoid costly payday loans and other forms of high cost credit. However in practice, if you are on a low income, the problem is that you have very little, if anything, to set aside, in the first place,” she explained.
What is Help to Save?
The Help to Save scheme was first announced by former Prime Minister David Cameron in 2016 but did not launch until last September. You are eligible for the scheme if you are:
- Entitled to Working Tax Credit and receiving Working Tax Credit or Child Tax Credit payments
- Claiming Universal Credit and have a household or individual income of at least £542.88 for the last assessment period. Universal Credit isn’t considered part of household income.
- Living overseas if you are a Crown servant, or your spouse or civil partner is.
- A member of the British armed forces, or your spouse or civil partner is.
You can save between £1 and £50 every calendar month and receive a 50% tax-free government bonus after two years, worth up to £600.
If you continue saving, you’ll receive another 50% tax-free bonus after four years – another £600.
So after four years, you could build a savings pot worth £3,600, split between £2,400 from your own contributions and a £1,200 bonus from the government.
You can make withdrawals from the scheme, but this will affect the size of your bonus. You don’t need to pay in every month to get the bonus either. You can set up a standing order to make regular payment or you can make one-off payments by debit card.
Accounts can be opened online or over the phone on 0300 322 7093 and the scheme is available to open until September 2023.