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According to recent figures, an estimated 3.5 million people on low incomes are now eligible to open new government- incentivised savings accounts designed to help people build up a ‘rainy-day’ fund.
Although much delayed since its original announcement in March 2016, the launch of the new Help-to-Save scheme follows an eight-month trial, with over 45,000 customers who have now deposited over £3 million.
The new scheme is easy to use, flexible and secure, and aims to promote savings behaviours and habits, whilst encouraging people who may not have been able to save before, to build up a savings pot. In summary, subject to certain limits, investors can receive a 50p bonus for every £1 they save in this new type of account.
How much is saved and when is up to the account holder – the rules stipulate that investors can save between £1 and £50 every calendar month. Accounts last for forty eight months from the date the account is opened and the government bonuses are added at the halfway point, i.e. after two years, and at the end of the four year lifespan of the account, or on the date that the individual becomes terminally ill or dies, if earlier. If an account is closed or ceases to be a help-to-save account before the end of a bonus period, no bonus is payable.
The investment limits mean that £2,400 is the maximum an individual can save, with a maximum government bonus payable of £1,200. In comparison, high street banks are currently offering a typical interest rate of between 1 and 2% on savings bonds, which does appear to make the help-to-save account a particularly attractive option for someone looking to save.
However, whilst the potential returns are very attractive, these accounts are specifically designed to help low earners and therefore, there are stringent rules on who can open one.
The scheme, which will be administered by HMRC, is open to UK residents who are:
- entitled to Working Tax Credit, and receiving Working Tax Credit or Child Tax Credit payments
- claiming Universal Credit and have a household or individual income of at least £542.88 for their last monthly assessment period (though note that payments from Universal Credit are not considered to be part of household income)
- people living overseas who meet either of these
eligibility conditions can apply for an account if they are:
- a Crown servant – or their spouse or civil partner is
- a member of the British armed forces – or their spouse or civil partner is
To apply, savers can visit www.gov.uk/helptosave or use the HMRC app. Opening an online account should be very straight-forward and it should take less than five minutes to do.
HMRC must decline or accept an application an account within 21 days of the date of the application, stating reasons accordingly. Applications can be declined if HMRC have reason to believe that the declaration or application is untrue or contains matters which are untrue. The Regulations governing the scheme do allow for appeals where HMRC decline an application.
Whilst feedback from the trial period has been largely positive, others have criticised the launch of such a scheme when the government is making changes to the benefits system. However, there are apparent benefits on offer, and any anyone meeting the eligibility criteria may wish to consider opening an account.
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