Over the years the Government has introduced many schemes to help people financially. In this article we will take a look at the Help to Save Scheme, which is designed to help people on low incomes save money.
What is Help to Save?
In its simplest sense it is an incentive designed to help those on low incomes save money. The scheme aims to pay a 50% bonus for every pound saved over a 4 year period. The scheme, being backed by Government, also ensures that the savings are protected.
How to qualify
If any of the 4 criteria below apply to you then you will be eligible for the scheme:
- Be in receipt of Working Tax Credit
- Have earnt more than £617.73 (can be joint) in the last month and are claiming Universal Credit
- Entitled to Working Tax Credit and receiving Child Tax Credit
You have to be living in the UK to be eligible unless you are a member of the armed forces or a Crown Servant.
If you receive benefit payments as a couple, you and your partner are each able to apply for an account.
How does it work?
The scheme works over a maximum of 4 years from the opening of the account and it pays out the bonuses at the end of year two and year 4.
You have to save a maximum of £50 per month into the account on average. This means that if you save only £25 in one month, you can then save £75 in another month. The important thing to note is that you can’t save more than £1200 in the first 2 years and £2400 in the 4 years. There is no penalty if you don’t save anything in any given month, but it will obviously affect the bonus you receive.
At the end of year two the bonus paid is based on the highest balance you achieved in the 2 year period and the bonus is 50% of that value. So, if you managed to save £800 as a maximum balance in the first two years, your bonus would be £400. Note that the bonus is paid into your normal bank account and not your savings account. You can withdraw money from the account, so in the example above, you could have reached £800 halfway through year two but then have taken out £200 meaning your final balance at the end of the two years was £600. Your bonus is still paid based on the maximum £800 that you managed to save in those two years.
At the end of year 4 there is another potential bonus, but this is calculated differently. The bonus is calculated on the difference between your highest balance in the first two years and the final balance at the end of year 4. Using the example above, if you managed to grow your savings from £800 to a highest balance of £1200 by year 4 then your bonus would be paid at 50% of £400 (the difference between £1200 and £800) which would be £200 paid into your normal bank account. Again, you can withdraw money without it affecting your bonus payment as it is based on your highest balance.
Carrying on with the example above, though, if your highest balance in the first two years was £800 but you withdrew £200 and ended up with £600 and you only managed to reach a highest balance of £800 again in the second two years, there would be no bonus paid as the difference between the two highest balances would be zero.
The absolute maximum bonus you can achieve is £1200 over the 4 years.
What happens at the end?
At the end of the 4 years, the account is automatically closed and cannot be re-opened. You will be able to keep all the money in the account but will not be able to open another help-to-save account. You can close your account early if you wish, but you will not be able to re-open it or apply for another account.
How to Apply
You can apply online using the following link: https://www.gov.uk/get-help-savings-low-income/how-to-apply
You will need to create a Government Gateway account and you can apply anytime from now until September 2023
Will it affect your benefits?
The scheme will most likely not affect your benefits but please do bear the following in mind; if you or your partner have over £6,000 in savings, including the savings in the help-to-save scheme, then your benefits such as Universal Credit or Housing Benefit could be affected. The bonus payments will also not affect your payments unless you put them into a savings account and you exceed the £6,000 limit.
Saving money is hard at the best of times, but the ability to receive up to £1200 in tax free money is a great incentive and certainly worth considering.
