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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
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.’
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