Last September (2018), the government introduced a new “help to save” scheme, aimed at helping those on lower incomes to build up cash savings.  Here is a brief guide to eligibility and how the scheme works.

Who can join the help to save scheme?

In order to join the help to save scheme, you need to meet at least one of three acceptance criteria:

  • receive Working Tax Credit
  • receive a nil payment for WTC but receive Child Tax Credits
  • be claiming Universal Credit and have earned a minimum of £542.88 in your last assessment period

Additionally, you must be resident in the UK or be a crown servant (or their spouse or civil partner) or a member of the armed services.

You will also need to have a ‘government gateway’ ID in order to make the application, which is done online at https://www.tax.service.gov.uk/help-to-save  The application process is purely digital, you do not need to submit any physical paperwork.  Last but by no means least, you will need to have an account with a bank or building society so that you can make payments into your Help to Save account, which will be held with National Savings and Investments (this is mandatory).

As a final point, acceptance to the help to buy scheme is per individual rather than per couple/household, so, for example, if you qualify and your partner doesn’t, then there is nothing to stop you from applying and if you both qualify then you can both apply (which you will need to do individually) so you can both benefit from the scheme (and pool your resources later if you wish).

How does the scheme work?

Once you have set up your help to save account, you can pay a maximum of £50 per month into it for up to four years.  You do not have to pay in the maximum amount, in fact, you do not have to pay in anything if you cannot afford to (although if you do choose to make a payment, the minimum amount is £1), but you cannot carry your allowance forward either, so, for example, if you can only pay in £25 one month, you cannot pay in £75 the next.  This means that in any one year, you can save a maximum of £2600.  At the end of the second year, the government will pay a bonus of 50% of the highest balance you achieved during that period and at the end of the fourth year, the government will pay a bonus of 50% of the highest balance you achieved during that period, minus the highest balance you achieved during the first two years and excluding the bonus.  So, for example, if you save the maximum amount then your first bonus will be £600, calculated as follows:

Saving £50 over 24 months gives you a balance of £1200 and the government gives you a bonus of £600 so you have a total balance of £1800.

If you then save the maximum amount for a further 24 months, you will have a total balance of £3000 but £1800 of that will be ignored since it will belong to the previous balance and the bonus, so the effective balance will once again be £1200 for another bonus of £600 giving you a final amount of £3600.

NB: You can make withdrawals from your help to save account but these can take up to three days to process and hence a help to save account is not the ideal place to keep emergency savings. 

At the end of four years, your account is closed and you cease to be eligible for further help to save accounts.

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