If you’re on a low income and struggling to save money, then the government’s Help to Save scheme might be able to help you get started. They pay an incredible 50% rate on your savings – so every £1 that you put away is topped up with a 50p bonus.
Who is eligible?
This savings scheme is specifically designed to help people on a low income. The government have set the following eligibility criteria (you would need to meet one of these):
- receiving Working Tax Credit
- entitled to Working Tax Credit and receiving Child Tax Credit
- claiming Universal Credit, if your household earned £604.56 or more from paid employment during the last monthly assessment period
You should also be based in the UK. Saving money is important, but not if it means you will be missing minimum debt repayments or struggling to pay important bills, council tax or your rent. Finally, if you have previously closed a Help to Save account then you are not eligible to open a new one.
If you stop claiming benefits then you can keep your account open and continue saving. Using a Help to Save could affect your eligibility for benefits, but only if you/your partner have £6,000 or more in personal savings.
How does it work?
You can pay in between £1 and £50 every month – and it’s recommended to set up a standing order so that this money automatically leaves your bank account after you get paid. Then, after two years, you’ll receive a bonus payment of 50% of the highest account balance you’ve managed to achieve.
For instance, if you had saved the maximum of £50 a month for the full two years without withdrawing any money, you will have reached a balance of £1200. The bonus will be £600, giving you total savings of £1800 after two years. If you had saved a smaller amount of £10 a month, you balance would be £240 and your bonus would be £120, giving total savings of £360.
You can then continue to save for another two years, and a second bonus will be paid at the end of the four-year period. This time, the bonus is paid on the difference between the highest balance from your first two years and your second two years.
After four years, your account is automatically closed, and the money transferred into your bank account. Somebody who makes the maximum payments every month for four years will have paid in a total of £2400 and earned a total bonus of £1200, meaning that the maximum savings you could have when your account is closed would be £3600.
I’m not eligible – what other options are there?
The interest rates on normal savings accounts aren’t great at the moment. Often you can get a better deal by using a ‘regular savings account’ linked to your bank account. For instance, HSBC offer interest rates of 2.75% for existing customers who open a regular saver and pay money in monthly.
If you are saving for a first home or for retirement, then you should also look into the Lifetime ISA. These accounts pay a 25% bonus on up to £4000 each year, however there are penalties if you withdraw the money for general use. Find out more here.