“Help to Save” : UK’s Savings Incentivisation Program for Low-Income Earners

“Help to Save,” is a savings incentivisation scheme offered by the UK government to low-income earners as a way of encouraging them to save money. Previous studies revealed that four out 10 people surveyed, have less than £500 to show as savings. As part of the British government’s commitment to extend assistance to citizens in all income levels, the government commits to increase by 50%, the amount saved as deposit in the “Help to Save” (HTS) account, at the end of a 4-year period.

HTS became fully operational in September 2018, after launching as a pilot program in January 2018. During the trial period, 45,000 qualified individuals were able to collectively save a total of £3 million. Now that the savings scheme has been officially launched, an estimated 3.5 million low-income earners currently receiving other government benefits, are expected to participate in the “Help to Save” program. If so, the government will be releasing Treasury funds of about £255 million by 2022 and 2023.

How “Help to Save” Works

First off, a participating low-income earner must either be a Working Tax Credit or Universal Credit recipient, and must have a separate savings bank account. All amounts deposited to the HTS account, must come from the individual’s personal savings account.

Money deposited to the special savings account can be withdrawn anytime, but also coursed through the personal savings account. However, reducing the HTS balance, also reduces the bonus amount that the government awards after the second and fourth years of maintaining the special savings.

The bonus earned after 2 years depends on the balance carried by the “Help to Save” account; to which every £1 saved garners a 50 pence bonus. To illustrate by example, a £600 deposit by the end of the second year, automatically earns a £300 bonus (50% of £600). The incentive is practically equivalent to 50% of the deposit balance; definitely a far cry from the 1% to 2% savings bond interest given by high street banks.

On the 4th and final year, any increase in the “Help to Save” balance, from the deposit amount that earned the first 50% incentive, will serve as basis for the final 50% bonus. Let us say that at the end of the 4th year, the special savings carries a deposit balance of £800, the £200 (£800-£600) increase will earn another 50% incentive equivalent to £100 (50% of £200).

This brings the total savings bonus to £400 (£300 + £100). After which, an HTS depositor may close the “Help to Save account” and withdraw all deposits and bonuses earned. However, an individual cannot reactivate or open another “Help to Save” account as the savings incentive is awarded only once per low-income earner.

How HTS Depositors Can Optimise this Benefit

As starters, low-income individuals enrolled in the “Help to Save” scheme currently receive benefits either under the Working Tax Credit program (allowance for disability reasons); or under its replacement benefit, the Universal Credit (allowance for disabilities and child support). However, the amount extended as financial supplement depends on the income and circumstance of an individual.

HTS enrollees though, may deposit £1 up to £ 50 per month, and not necessarily on a monthly basis. It is up to the HTS depositor to find ways of optimising the benefit by eliminating unnecessary expenses, particularly money spent on vices like smoking, drinking or gambling. Another means, is to take advantage of promotional discounts, whenever constrained to buy clothes, shoes, gifts or household articles.

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