The Government has today launched a new scheme that should help people on low incomes to start saving. The scheme will incentivise saving by offering a bonus of 50p on every £1 saved, up to a maximum of £1,200 extra over four years.
The special Help to Save accounts will essentially be offering an interest rate of 50%, which is why there are strict restrictions on who can open one and how much can be paid in. Interested savers must be UK residents and receiving Working Tax Credit or Child Tax Credit payments, or claiming Universal Credit with a household income of at least £542.88.
Note that if you stop being eligible after you've already opened a Help to Save account, you'll be able to keep it for the full term anyway. If you accumulate more than £6,000 in savings altogether, however, this could affect certain benefits.
Savers will be able to put a maximum of £50 in these accounts per month, with the bonus paid at the end of the second and fourth years; after year four the account will be closed and people won't be able to open another one. HMRC has announced that its trial of the scheme has already seen 45,000 customers deposit over £3 million, helping people to see that saving is possible on a low income.
"Savings shouldn't be a luxury; they are an essential part of planning for the future," John Glen, economic secretary to the Treasury, said. "But for some, putting away even a tenner each month can be a tough habit to get into. Whether you're saving up to take the family on a much-needed holiday or to take the next step in life, Help to Save is designed to make saving possible for every hardworking person in this country."
As with a regular savings account, people can set up a standing order to ensure they make the maximum payment every month, and get the biggest return as a result. Unlike most regular savers, however, they will also be able to withdraw funds whenever they need to, although naturally this could affect the bonus.
Eligible savers will be able to open a Help to Save account through the official Government website. For the rest of us, there's still the option of getting some of the highest returns on the market by putting a little away in a regular savings account each month, or for those who'd rather have continued access to their cash, there's always the top easy access accounts to consider.