Half a million low-income savers to get up to a 50% Government boost

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Help to Save Scheme Extension Boosts Savings for Low-Income Individuals

An extension of the Help to Save initiative until 2027 is anticipated to enable an additional 550,000 individuals to receive a Government incentive for their savings. This scheme offers a significant boost to the savings of low-income workers, encouraging financial resilience.

Scheme Extended to Benefit More Savers

The Help to Save scheme, designed to bolster the savings of those on lower incomes, has been broadened to include individuals who are employed and currently receiving Universal Credit.

This expansion, recently declared by HMRC, makes the savings program accessible to an estimated 550,000 further individuals who are looking to improve their financial stability.

Understanding the Help to Save Account

Launched by the Government in 2018, Help to Save is a savings account specifically intended to assist low-income earners and those receiving certain state benefits in building their savings. The incentive is substantial: for every £1 saved over a period of four years, the Government provides a bonus of 50p.

Account holders have the flexibility to deposit between £1 and £50 each month. It is not mandatory to contribute every month, providing flexibility for savers with fluctuating incomes.

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For those who consistently save the maximum of £50 monthly, this translates to a potential Government top-up of £25 each month. Bonuses are awarded at the conclusion of the second and fourth years following account opening.

Significant Bonus Payments

Savers who maximize their contributions by depositing £2,400 over the four-year duration of the scheme are eligible to receive a total bonus of £1,200. These bonus payments are directly deposited into savers’ bank accounts, occurring at the end of both the second and final years of participation.

Extension of Scheme Timeline

Originally scheduled to conclude in September 2023, the Help to Save scheme was initially extended to April 2025. It has now been granted a further extension, ensuring its availability until April 2027, allowing more people to benefit from this savings opportunity.

Savings in the UK: A Wider Perspective

Recent data from the Department for Work and Pensions (DWP) for 2023/2024 reveals that a significant portion of the UK population, approximately one in five Britons, possesses savings of less than £100.

The Help to Save scheme serves as a valuable mechanism for individuals with limited incomes to commence building a savings foundation and enhance their financial security.

Data indicates strong engagement with the scheme, with 93 percent of savers consistently depositing the maximum monthly amount of £50 into their Help to Save accounts.

As of the end of April 2024, there were 516,000 active Help to Save accounts, with total deposits aggregating to £492.5 million. This equates to an average savings balance of £953 per account.

Savings Disparity in Britain

In contrast to those with minimal savings, a considerable disparity exists in Britain, highlighting a gap between those with very modest savings and individuals with substantial wealth.

Among Britain’s most affluent savers, 12 percent hold between £50,000 and £200,000 in savings, 3 percent have accumulated between £200,000 and £500,000, and 2 percent possess savings of £500,000 or greater.

Exploring Further Savings Solutions

Various proposals have been suggested to further assist individuals who find it challenging to accumulate even a small emergency fund.

One such concept involves automatic enrollment into a £1,000 readily accessible emergency savings fund, integrated with existing pension schemes.

This fund could be established through incremental increases in pension contributions. Once the fund reaches £1,000, any additional contributions would be redirected into individuals’ retirement savings, as proposed by the Resolution Foundation think tank.

Another proposition is a Lifetime savings plan, advocated by fund manager Schroders and the Pensions Management Institute.

This plan could build upon workplace pension savings frameworks, aiding individuals in developing both an emergency savings buffer and saving towards longer-term objectives like acquiring a deposit for a home.

Government Stance on Savings

Economic Secretary Emma Reynolds commented, ‘We aim for more individuals to have some savings available for unforeseen circumstances. To this end, we are extending access to this support to hundreds of thousands more working families who are managing tight budgets.’