What is the new Help to Save scheme?

 

People on low wages will soon be eligible for a financial top up from the government of up to £1,200 over four years if they put money away into a savings pot.

 

Up to 3.5 million workers on in-work benefits like universal credit or working tax credits will be able to save up to £50 a month (£600 per year) and receive a bonus of 50% (£300 per year) under the newly-announced Help to Save initiative.

 

The scheme will begin in 2018 after a period of consultation. The bonus will be paid after two years, with the option to keep saving and get another £600 at the end of a four-year period. It has not yet been revealed when or how savers will be able to access their savings, possibly being at the end of the two-year savings period, in a similar format to an ISA. 

 

Chancellor George Osborne said in a statement:

 

“This government is determined to improve the life chances of the poorest in our society and our new Help to Save scheme will mean millions of low income savers across the country could now receive a government bonus of up to £1,200 to help them build up their savings.”

 

Debt Advice Foundation CEO David Rodger welcomed the plans, saying;

 

“Encouraging people on lower incomes to save is clearly a step in the right direction. It is always a good idea for people to have a financial buffer to protect them from unexpected income shocks such as divorce, which are one of the leading causes of debt problems. Contingency savings also protect against unforeseen essential expenditure such as a car or washing machine repair bill, which can often cause people to borrow and get into debt.

 

“The Government’s pledge to “top up” savings pots should create motivation to contribute, but the question remains as to whether people on low wages have expendable income available at the end of the month to put into an account.

 

“Altering attitudes to borrowing and saving is right at that heart of our charity's education work, so we would encourage any scheme which develops good financial habits.”