Households on a low income may soon get help to boost their savings under a new Government initiative announced today.
Under the ‘Help to Save’ scheme, those on a low income will be able to save up to £50/month for four years with the Government adding a bonus of 50% after two years, and a further 50% after four years on any new savings added.
This means those who save the maximum of £3,600 over four years will get a bonus of £1,200 (split into two payments of £600).
The scheme will be open to all adults in receipt of Universal Credit with minimum household earnings equivalent to 16 hours at the National Living Wage - roughly £6,365 in 2017/18 - or those in receipt of Working Tax Credits.
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People will be able to make withdrawals while they have money in the account to cover urgent costs and there will be no restrictions over how Help to Save funds can be used.
The government says up to 3.5 million people will be eligible for the scheme, which has been launched after research shows that almost half of UK adults have less than £500 set aside for emergencies.
Chancellor George Osborne says: “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.”
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How exactly will the scheme work?
Other than what’s detailed above, it’s unclear how exactly the scheme will work.
The government says it will consult on the “framework for implementation and detailed policy design issues” shortly after the Budget (on 16 March 2016).
However, it adds that the accounts will be available “no later than April 2018”.
‘The devil will always be in the detail’
StepChange debt charity welcomes the scheme, but warns that the devil will be in the detail.
Its chief executive, Mike O’Connor, says: “With any such scheme, the devil will always be in the detail and there are a number of design features to be worked out.”
He adds: “We are concerned that having to wait two years before getting any bonus is too long. Such a wait may see families overtaken by events as they access the funds for emergencies, therefore concern at losing the bonus could simply act as a disincentive to save in the first place.”