Low-wage workers to get 50p for every £1 they save

UP to four million people on low incomes will be able to benefit from a new savings scheme in which investors receive 50p from the Government for every £1 they pay in.

Help to Save allows people to pay in up to £50 a month over four years, with a maximum saving of £2,400 resulting in an overall bonus of £1,200.

Launching the scheme, HMRC said it would be ‘easy to use, flexible and secure’. It aims to help those on low incomes build up a ‘rainy day’ fund and ‘encourage savings behaviours and habits’.

How much is paid into Help to Save accounts and when is up to the account holder and they do not need to pay in every month to get a bonus.

John Glen, Economic Secretary to the Treasury, said: ‘Savings shouldn’t be a luxury, they are an essential part of planning for the future. But for some, putting away even a tenner each month can be a tough habit to get into.

‘Whether you’re saving up to take the family on a much-needed holiday, or to take the next step in life, Help to Save is designed to make saving possible for every hardworking person in this country.’

Help to Save is available to working people on Tax Credits and those on Universal Credit who are also earning at least £6,514 a year. The scheme was announced by then Chancellor George Osborne in the March 2016 budget and has been subject

‘It aims to encourage savings habits’

of an eight-month trial involving 45,000 people from January this year.

An HMRC spokesman said: ‘There’s no set limit for income because it depends on your circumstances (and those of your partner). For example, (it would be) £18,000 for a couple without children or £13,100 for a single person without children – but it can be higher if you have children, pay for approved childcare or one of you is disabled.’

The account was welcomed by debt charities which have previously raised concerns about how few households were saving for a rainy day.

Accounts take about five minutes to open online. They are limited to one per person and withdrawals are allowed at any time, although they can affect the size of the eventual bonus.

The bonus is paid out in two chunks – 50 per cent after two years and the other half at the end of four years. Savers can spend the bonus in any way they wish.

Meanwhile, figures show that savers have suffered a lost decade since the financial crisis as record-low interest rates have destroyed returns.

In September 2008 before the collapse of Lehman Brothers, the average bank account paid interest of 3.1 per cent – that now stands at just 0.43 per cent. A saver who has held £10,000 for the past decade would have just £10,852 today.

Most lenders have slashed interest rates on their current accounts to zero.

This means that today £164billion is held in accounts paying no interest, according to Bank of England data, up from £48billion in September 2008.

Laith Khalaf, from investment firm Hargreaves Lansdown, who uncovered the data, said: ‘Cash savers have been one of the great losers from the financial crisis.’

For details on Help to Save, visit www. gov.uk/helptosave or call 0300 3227093