Chancellor Rachel Reevesis expected to announce the expansion of the savings scheme in Wednesday’s Budget (Shutterstock) (Credits: Shutterstock / Fred Duval)
More people on low incomes will get help saving money through a government-backed scheme that offers a hefty cash bonus, the Treasury said ahead of the Budget.
Chancellor Rachel Reeves will announce that the Help to Save scheme will be made permanent and opened up to parents and carers.
It means an extra 1.5million people will become eligible for the scheme as part of Labour’s attempts to ease the cost of living.
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How Help to Save works
Help to Save is designed to incentivise lower income people to stash away money and make saving cash easier.
It offers a bonus of up to £1,200 paid straight into the savers’ bank account, split into two payments after two and four years.
Savers must be on universal credit and have a job with take-home pay of £1 or more per month to be eligible.
Savers can put in as little as £1 a month to their Help to Save account (Getty Images)
The scheme lets you put away £50 a month over a four-year period, which works out to £2,400.
The bonus is worked out as 50% of what you have paid into the account, up to the maximum of £1,200 over the four-year period.
What’s changing?
The scheme, widely seen as a key way to get people saving, was previously set to run out in 2027, but now it is being made permanent.
And from 2028 onwards, it will open up to 1.5million more people who are parents and carers on universal credit.
Chancellor Rachel Reeves will deliver the Autumn Budget on Wednesday afternoon (Reuters)
A Treasury source said: ‘For too long governments have ignored the role of carers and parents in keeping the economy ticking.
‘The Chancellor wants to change that and help millions more working people build a savings habit.’
The scheme will be expanded to include benefit claimants who have children in education and carers who provide 35 hours of care to a disabled person.
Does it work?
There were 2.7million people on Universal Credit who were also in employment at the end of last year.
Antonia Stokes of the Low Incomes Tax Reform Group called Help to Save ‘a very attractive product for people on low incomes who want to get into a regular savings habit.’
About 575,000 customers have opened a Help to Save account since the scheme was launched in September 2018, according to official data, paying £588million into their savings pots.
But Deven Ghelani, chief executive of welfare group Policy In Practice, told Metro that while it is ‘welcome news,’ only one-in-five eligible households had opened an account so far.
Only one-in-five eligible households have actually used Help to Save since it was started in 2018 (Getty Images)
‘With costs rising, low income families are struggling to stay on top of bills, never mind having money to put aside,’ he said.
Martin Lewis of MoneySavingExpert, meanwhile, called it ‘by far the best-paying form of savings.’
He said on a recent podcast episode that the 50% bonus is ‘absolutely unbeatable,’ and that there is ‘nothing else close to it’ for would-be savers.
Grace Brownfield, head of debt advice communications at the National Debtline service, told Metro: ‘Making the scheme permanent is a welcome step – especially extending it to parents and carers who are often most exposed to financial shocks.
‘But for many, the biggest barrier to saving is having nothing left at the end of the month, so this must go hand-in-hand with wider measures to tackle the cost of living.’
Why is it useful?
Labour has positioned this Budget as one that tackles the high cost of living for lower income and working people.
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But some of the other measures that will reportedly be announced been criticised for doing the opposite – for example cutting the amount of money that people can save tax-free in a Cash ISA.
Reeves and Prime Minister Keir Starmer have positioned the Budget as helping working people (Reuters)
The savings limit for Cash ISAs is set to be reduced to £12,000 a year, down from £20,000, amid a push to get people investing in the stock market instead.
It’s also thought that Reeves will also extend a freeze on income tax thresholds past the current 2028-29 deadline, which will cause people to pay more tax in the long run.
The Help to Save scheme ‘has already benefited over 500,000 savers with millions paid out in bonuses, making this permanent and expanding access will mean even more people can benefit for longer,’ the Treasury said.
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