Help to Save: the key facts you need to know
Up to 3.5 million people in low paid jobs will be eligible to receive a government-backed bonus on their savings as part of a move to improve “the life chances of the disadvantaged”.
Prime Minster, David Cameron, today announced the plan, following research showing almost half of UK adults have less than £500 set aside for emergencies.
Separately, Cameron also confirmed a rise in the National Minimum Wage. Here’s what you need to know about the schemes.
Who is eligible for Help to Save?
If you’re in work and receive benefits such as Universal Credit or Working Tax Credits, you’ll be eligible. The government says the scheme will be available for up to 3.5 million low paid workers.
How does Help to Save work?
If you’re eligible, you will be able to save up to £50 a month and receive a 50% government bonus after 2 years – worth up to £600.
You can then choose to save under the scheme for a further two years to receive another £600 bonus.
So after four years, you could have built a savings pot worth £3,600, split between £2,400 from your own contributions and a £1,200 bonus from the government.
The government says you’ll be able to make withdrawals from the scheme to cover emergency costs and there will be “no restrictions over how Help to Save funds can be used”.
When will the scheme be available?
The government says Help to Save will be available “no later than April 2018”.
The government says it will need to consult on the scheme shortly after the Budget on Wednesday in order to come up with a framework and detailed design of how it will work in practice.
Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “Help lower earners to build a rainy day fund and a reduction in the reliance on payday lending should follow.
“Instilling the savings habit is not just about attractive products with low minimum contributions, there needs to be an education programmes alongside to promote the benefits of saving – a great habit where oak trees from acorns grow.”
Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “Rainy day savings are a key weapon in the war against problem debt. Putting aside a small amount of money that you can access in an emergency reduces the risk of debt problems later on – and anything to encourage people to save should be warmly welcomed.
“We are pleased that Help to Save will be targeted at those who need it most, and hope that the scheme will play a part in building the savings culture that the UK so badly needs.”
Increase to the National Minimum Wage
Separately today, the Prime Minister also announced an increase to the National Minimum Wage to benefit those aged under 25 by an average of £450 per year.
From April, those aged 25+ will receive the new National Living Wage of £7.20 per hour, a pay rise of £900 a year – first announced in the Summer Budget 2015.
But the following changes to the National Minimum Wage will take place for those aged under 25 from October 2016:
- For 21-24-year olds it will rise by 3.7% to £6.95 an hour.
- For 18-20 year olds, it will rise by 4.7% to £5.55 an hour
- For 16-17 year olds it will rise by 3.4% to £4 an hour
- Apprentices will see their wages rise by £3% to £3.40 an hour.
From April 2017, the National Living Wage and National Minimum Wage rates will be uprated in parallel.