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Help To Save Scheme Explained
Updated: Sep 19, 2022
If you’re trying to save money but feel like you’re always short on cash, it may be time to get serious about saving. But where should you start?
Help To Save, a savings scheme announced by the government in 2015, could be just what you need.
In this guide, we’ll take an in-depth look at how the scheme works and how it could help you achieve your financial goals faster than ever before.
How does the help to save scheme work?
The aim of Help to Save is to help people save money. The Government's original policy was to pay savers an additional 25p for every £1 they saved, up to a maximum of £50 per month.
But in November 2017, Chancellor Philip Hammond announced that savers will now get 40p on every pound they save, up to a maximum monthly contribution of £80.
This means that if you put £200 into your Help to Save account in one month, you'll receive a bonus payment of 40p, meaning your pot will actually contain £220.
What are you saving for?
The government's new Help to Save scheme is a lifeline for UK households, who can save up to £50 a month into a savings account and receive an extra 40p from their employer every time they do.
It means every year, that money will go up to £1,200 as long as you are paid weekly - by 2020, workers could be receiving £3,000 per year just for putting aside their wages.
If you have been thinking about saving but have been put off by low interest rates on your savings accounts or cash ISAs then why not try Help to Save?
There are two types of savings accounts available on the scheme: cash accounts and stocks and shares ISAs. You should consider which type is right for you when choosing where to open your account.
What if I can’t afford to save the full amount?
The Help to Save scheme is designed to help you get started saving, with an easy way to put aside money month after month. However, if your income falls below a certain threshold, it might not be worth you putting anything aside for a rainy day.
That’s because many people will lose benefits like Working Tax Credits if they start earning more money than expected - a situation known as penalty for success.
Who can take part?
The Help to Save scheme is for those on basic-rate income tax, and help is only available for those who are aged 16 or over. Those aged 60 or over are also eligible if they are a single person living alone or with someone aged 65 or over.
As mentioned earlier, as well as working out your gross wage/salary, you must also take into account any additional taxable benefits you receive from your employer (such as free private healthcare).
For example, if you pay into a pension scheme, then that savings amount can be deducted from your income before deciding whether you qualify for help to save.
Saving is considered one of Britain’s biggest problems - with too many people struggling to build an adequate buffer fund.
This means that when something happens such as redundancy or injury, they may find themselves unable to cope financially and could be forced into debt or reliance on family or friends.
How do I get started?
If you want to open an account and start saving with Help to Save - there are a number of providers you can choose from, including banks and building societies.
It is your decision which one will be best for your needs – just remember that if choosing to have funds paid directly into your account each month, pay close attention to the monthly fee!
Help To Save Scheme Explained - The Bottom Line
The Help to Save scheme is one of a number of government initiatives designed to help first-time buyers onto (or up) onto the property ladder.
In essence, it's a sort of reverse mortgage scheme, aimed at helping you use your savings as a deposit for your first home.
The tricky part is that you have to have saved at least £1,600 – which isn't easy if you're just starting out in life or working in an entry-level job.
However, for those who are able to meet the requirements of Help to Buy and are looking at getting on that housing ladder sooner rather than later then it could be a great deal.