What is the Help to Save Scheme?
Former Prime Minister David Cameron initially announced the Help to Save Scheme in 2016, but due to many delays, the Scheme didn’t commence until September 2018. The Scheme was designed to encourage low earners to save money by rewarding them with a 50% bonus incentive. So, for every pound invested, the government will contribute 50p for a maximum of £50 per month over four years. The maximum amount that participants can be rewarded is £1,200.
When the Scheme launched in 2018, the initiative was open to an estimated 3.5 billion UK residents who receive Universal Credit/Child Tax Credits and have a monthly household income of at least £542.88 or more. However, the House of Commons revealed that only 80,810 Help to Save Schemes were opened at the end of 2018. The result demonstrates that majority of low-income earners across the country are struggling to put very little money aside, or anything at all. However, the number of Help to Buy Schemes has significantly increased this year by 101% (163,000).
Every little helps
The 50p reward might not sound like much, but once you’ve invested an adequate amount of money into your savings over time, you’ll notice that the reward contribution will make a big difference. For instance, if you save £50 per month over two years you will accumulate £1,200; therefore, you will be rewarded £600 from the government. And, if you continue saving for a further two years, you will receive another £600 in your bonus pot which will bring your total savings to £3,600.
To be eligible for the Help to Save Scheme, adults must have the following:
- Receive Working Tax Credit or Child Tax Credit payments
- Claim Universal Credit and have a household or individual income of at least £542.88 for the latest assessment period. Please note that Universal Credit isn’t considered a part of a household income
- Live abroad if you are a Crown servant or if your spouse or partner is
- Apart of the British armed forces, or your spouse or civil partner is
The bonuses that you receive will be tax-free, and benefits such as Housing Benefits won’t be affected unless you have a total savings of over £6,000 including the amount that’s in your Help to Save account.
How to apply for the Scheme
To take advantage of the Help to Save Scheme, those that are eligible can visit the government website or through HMRC where they will have to use their Government Gateway Account to apply. If applicants don’t have a Government Gateway account, then they need to create one in order to apply for the Scheme. Furthermore, applicants will also need to provide their bank account details as part of the procedure.
How does the Help to Save Scheme work?
Participants can deposit as little as £1 – £50 per month in their savings account. Monthly deposits aren’t compulsory, and withdrawals can be made at any time, but if participants close their account, then they face the risk of losing their next reward. And, they won’t be allowed to open another Help to Save Scheme.
After two years applicants will receive their first bonus. Bonus payments are paid directly into their bank account instead of their Help to Buy Scheme account. The bonus amount will account for 50% of the balance in their savings account up to a maximum of £600. If they continue saving for a further two years, then they will receive a second bonus which will account for 50% other balance since their initial bonus.
How will the Help to Save Scheme benefits low-income earners?
The government’s Help to Save Scheme will enable people to achieve their long term saving goals and give them something to fall back on in case of any emergencies. Furthermore, they will no longer need to rely on high-cost short-term loans which could potentially increase debt. Participants are allowed to withdraw money from their savings in times of need, as the first bonus is calculated on the highest balance held in their account so that they won’t lose any money from it.
The initial Help to Save Scheme demonstrates that there’s definitely a demand for low-income earners who want to achieve their short term financial goals or to put money aside for a rainy day. Eight months into its pilot scheme, 45,000 customers made deposits of over £3 million. However, to ensure the success of this Scheme it’s essential that the government raises awareness through the help of advisory organisations and housing associations to inform those who are eligible and advise how they can benefit from it.