Poor take-up of Help to Save scheme offering £1,200 bonus
At launch in September 2018, the Help to Save scheme was aimed at the 3.5 million people in receipt of Tax Credits and Universal Credits.
Since then, the effects of the Covid pandemic has resulted in more people claiming benefits for the first time. Latest statistics revealed more than 5.5 million people now claim Universal Credit, entitling them to open a Help to Save account.
However, data obtained by investment platform AJ Bell, revealed just 359,000 accounts have been opened – just 6.5% of those eligible.
And of this number, a lowly 143,000 holders (2.5%) are depositing the maximum £50 a month, and therefore making the most of the generous government perk.
But for one in seven accounts (48,000) they have never had any cash added to them.
The Help to Save scheme was designed to “improve the life chances of the disadvantaged” after research revealed half of UK adults had less than £500 set aside for emergencies.
It allows low earners in receipt of certain benefits to save a maximum £2,400 over a four-year period. Each £1 saved would gain 50p, resulting in a bonus of £1,200. See YourMoney.com’s Help to Save guide for more information.
AJ Bell head of personal finance, Laura Suter, said: “The reality is that the scheme has been poorly advertised, so lots of people aren’t aware of the perks on offer if they were able to put a bit away each month.
“This is coupled with the fact that lots of people on benefits just don’t have spare money to put away each month, even if they wanted to. These figures also pre-date the current cost-of-living crisis, and it’s inevitable that the number of people saving the maximum £50 a month will slump this year, as will the number of people using the scheme at all.”
The AJ Bell data also revealed that over 85% of people who have opened a Help to Save account have made some contributions and 40% are putting in the maximum amount “so in some respects the scheme is doing a lot of good”.
Suter added: “But had the scheme been better publicised in recent years, more households would have been incentivised to save regularly and would have had a rainy day fund going into the current financial crunch. Many of those who had cash to spare in the past few years didn’t realise they could get this generous boost to their savings.”
For anyone who does have spare cash at the moment this is a hugely valuable incentive, according to Suter.
She said: “The flexibility of the scheme is one of its massive perks, as savers can withdraw the money whenever they need it and they will still get a bonus equivalent to half of their highest balance, so they aren’t penalised if they need to take out some cash before the two-year bonus period is up.”
An HMRC spokesperson said: “The Help to Save scheme supports hundreds of thousands of people on low incomes to save for their future, with more than £250m deposited in accounts since the scheme opened.”