Want to save money? The government has set up a ‘Help to Save Scheme’ to encourage people to save your money better. In this article, Quick Loans Express explains everything you need to know about the government Help to Save initiative.
When Help to Save is due to start
Help to Save
In January 2016, the then Prime Minister, David Cameron, announced the beginning of the Help to Save scheme. It was then officially launched by the Chancellor of the Exchequer George Osborne in the following Spring Budget. He said that its full roll-out was expected ‘by April 2018 at the latest’. With no further information about this scheme, we ask: what has happened to it? When is its launch date?
This article also explains the scheme in detail: how it’ll work, who is eligible and the reasons behind the scheme. We also offer advice for those who aren’t entitled to enrol in Help to Save. What should they do?
When is Help to Save due to Start?
A spokesperson for the Treasury said that there would be a controlled introduction to the saving scheme. The trial period would start in January 2018 when recipients of Working Tax Credits would be invited to take part. This initial roll-out would allow HMRC to test and develop it at every stage. They will gradually increase numbers until April 2018 when recipients of Universal Credit would also be eligible to apply.
Some financial analysts have been critical of this 6-month delay. They say that it could be a sign of the lack of planning that went into the scheme in the first place before they announced it. However, they agree that it’s better than any teething problems are sorted out in its initial stages before more people apply.
What is the Goal of Help to Save?
Help to Save is a government-backed scheme whose aim is to encourage low-earners to put some money by every month. It was launched partly as a result of 2015-16 research into Britons’ saving habits. This found that almost half of UK adults had less than £500 put by in case of an emergency.
Therefore, this scheme was designed to give people an incentive to save money but not for their long-term saving goals. Instead, it’s intended to make sure that people have a ‘rainy day’ fund in case of an emergency or unexpected expenses. With this emergency fund in place, low-paid workers are less likely to need expensive short-term credit facilities like instant payday loans or logbook loans.
How Will Help to Save Work?
Once workers have opened an account, they’ll be expected to make monthly contributions of £50 a month for at least 2 years. Once this term is up, they’ll be given a choice to sign up for another 2 years.
In return, the government has guaranteed that they’ll earn a 50% bonus on their contributions. This bonus payment will be completely tax-free. For someone who saves for the entire 4-year period of the scheme, it’s possible for them to earn up to £1,200 as a bonus.
The money in the account is easily accessible, and there are no restrictions on account-holders taking out their savings early. However, the government has warned that early withdrawals will lead to a reduction in the size of their bonus. As yet, there are no further details about how they will calculate this reduction.
Who’s Eligible for the Help to Save Scheme?
The government estimate that 3.5 million Britons will be eligible to take part in the Help to Save scheme if they wish.
The criteria are that applicants must be recipients of Working Tax Credits. For those in areas where Universal Credit has taken over from this benefit, applicants must work a minimum of 16 hours at the National Living Wage and have at least £542.88 in their last monthly assessment period.
Would-be recipients have a full 5 years to register from the end of the trials.
Criticisms of the Help to Save Scheme
Apart from criticisms over the delay in its roll-out, there have been worries that it would encourage people to opt out of auto-enrolment pension schemes. When living hand-to-mouth, often the more immediate gains are more attractive than long-term financial planning. This may result in people turning to cash loans.
Others (including the StepChange Debt Charity) have criticised the length of the commitment to the scheme. They believe that 2 years is too long to wait for the ‘reward’ in the form of a bonus.
Also, there is the worry about whether some low-earners will be able to manage a £50 deposit every month. With wage/state benefit freezes and caps plus higher inflation, some critics wonder whether participants could even afford to save this relatively small sum.
What to Do if you aren’t Eligible for the Help to Save Scheme
Even if you aren’t eligible for Help to Save, you should find out about other government-backed schemes such as Lifetime or Junior Isa. Both can give you an incentive to save. As can some Credit Union saving schemes.
Not being eligible for this scheme is no excuse not to get into the habit of putting a little money by every month as soon as you receive your pay. Put a budget in place and aim to save the equivalent of 3-6 months of your expenses gradually. This ‘rainy day’ fund will help you when you desperately need cash. You’ll be able to avoid the interest rates and fees of short-term credit facilities.
We should welcome any scheme which encourages Britons to change their spending and saving habits. It’s quite possible that because of this scheme, people will get used to saving that they’ll continue long after it ends.
Financial planning can result in significant savings in the long-term and avoid the use of online loans in times of emergencies. What are you waiting for? Start saving today!