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Help to Save scheme offers low earners £1,200 saving bonus

The government has announced a new scheme to encourage low earners to save more.

 

by Michelle McGagh on Mar 14, 2016 at 12:28

Help to Save scheme offers low earners £1,200 saving bonus

The government is offering low-paid workers a bonus of up to £1,200 to encourage them to save.

Prime minister David Cameron has announced plans for a Help to Save scheme that will provide a savings boost to those on low incomes and those who qualify for in-work benefits. It will benefit 3.5 million employees receiving working tax credits and those who qualify for universal credit.

Under the scheme, individuals will be able to save £50 a month and receive a bonus of 50%, earning a maximum bonus of £600 after two years. They will be able to carry on saving for another two years, until the total saved is £2,400 and the total bonus received is £1,200.

Cameron said the scheme would help individuals ‘start a savings fund to get them through difficult times, giving people on low incomes a pay rise and making sure teenagers have the experience and networks to succeed’.

The Help to Save announcement comes at a time when fewer Britons have set money aside for a rainy day and the government said it was concerned that almost half of UK adults have less than £500 set aside for emergencies.

According to recent Santander research, one in five people do not save anything in an average month and people are only likely to save for a special occasion rather than for a rainy day.

Joanna Elson, chief executive of the Money Advice Trust that runs National Debtline, said an emergency fund was a ‘key weapon’ against running up debt.

‘Rainy day savings are a key weapon in the war against problem debt,’ she said. ‘Putting aside a small amount of money that you can access in an emergency reduces the risk of debt problems later on – and anything that encourages people to save should be warmly welcomed.

‘We are pleased that Help to Save will be targeted at those who need it most, and hope that the scheme will play a part in building the savings culture that the UK so badly needs.’

However, Danny Cox, a chartered financial planner at Hargreaves Lansdown, said offering incentives in isolation would not be enough to help encourage saving.

‘Help lower earners to build a rainy day fund and a reduction in the reliance on payday lending should follow,’ he said. ‘Savings incentives clearly work, however the potential beneficiaries of these schemes will be the most hard-pressed to get off the mark. Instilling the savings habit is not just about attractive products with low minimum contributions, there needs to be an education programme alongside to promote the benefits of savings – a great habit where oak trees from acorns grow.’

8 comments so far. Why not have your say?

Keith Cobby

Mar 14, 2016 at 14:01

This tune is straight out of the Gordon Brown songbook!

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Luichicornish

Mar 14, 2016 at 17:39

Using rate payers money to people who don't earn for self-sufficient living, is smack in the face tor people who care to look after themselves for a rainy day. Ask to pensioners what they think.

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Sinic

Mar 14, 2016 at 19:15

The better off benefit from considerable tax concessions on pension contributions, ISAs, EISs, VCTs amongst a wide range of entirely legitimate tax avoidance measures. This initiative is relevant to people who are low paid but WANT to work. This modest largesse applies to people who don't have the tax liability to avoid but who nevertheless may want to save for their and their family's futures.

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BritishBlue

Mar 14, 2016 at 19:25

Low paid first jobber puts in £50 pm from salary, bank of mum&dad gives £50pm to offspring, along with their other support. Govt funds better off families as usual.

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Mark Stringer

Mar 14, 2016 at 19:28

Look up "shameless" in the dictionary and there will a photo of Gideon Osbourne. He's throwing just about everything, but his family's personal wealth at the voters in the run up to the EU in/out vote.

First the pension tax relief bribe which will be slashed eventually for 40%'ers and now this nonsense that probably will not really benefit very many at all but gets him some brownie points with the low paid.

Still he's given the disabled a good kicking by taking away some mobility benefits, because anyone who is disabled really just wanted to be that way just to get the paltry help.

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Sinic

Mar 16, 2016 at 09:19

@BritishBlue. You may be right regarding a small minority of cases but your biased post demonstrates a socio-political resentment rather than an objective view of the scheme.

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BritishBlue

Mar 16, 2016 at 09:37

I was merely applying the Law of Unintended Consequences. Such schemes tend to get hijacked by the savvy, whilst the intended beneficiaries remain oblivious of their existence.

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Mark Stringer

Mar 16, 2016 at 09:42

Sinic, I agree, but have some sympathy with @BritishBlue as this and other governments have made many of us judgemental in respect of anyone seemingly needing help or getting some assistance that is seen as being a taxpayer "hand out". On the face of it a "hand out", but how many actually have the money to save that paltry sum anyway.

The tory/libdims mishmash made the genuine needy pariahs (I mean who with a heart would evict someone who has lived all their life in a council house because they have too many bedrooms, it smacks of bean counter mentality society) with the collusion of the press, but Bliar and his band of champagne socialists taxpayer largesse made the genuine needy easy targets.

I'd suggest that this latest Osbourne smoke and mirrors will be taken up by marginally more people than the free housing on the moon.

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