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Government postpones introduction of Help to Save

  • The government has postponed the full introduction of Help to Save until October 2018 (it was originally proposed to start in April 2018).
  • The scheme was first announced on 11 January 2016, and is designed to encourage people on low incomes to build up a rainy day fund.
  • It will begin a trial in January 2018, inviting gradually increasing numbers of Working Tax Credit claimants to take advantage of the scheme. It will begin inviting Universal Credit claimants in April 2018.
  • People who are eligible for Help to Save will have five years from the end of the trial in order to take advantage.

Full details are available here.

People will be able to pay up to £50 a month into a Help to Save account, and earn a government bonus of 50% on their contributions. The bonus will be paid after two years. At that point, savers can decide whether to continue saving for another two years. In total they will be able to put away £2,400 and get bonuses of up to £1,200.

The idea is for people to be able to use the money for emergencies, so they will be able to make withdrawals before the end of two years. The bonus will be based on the highest balance held in the account over that time.

Help to Save will be open to 3.5 million people. To qualify they will either need to be claiming Working Tax Credits or claim Universal Credit, and have a household income of at least £542.88 in their last monthly assessment period.

Sarah Coles, personal finance analyst, Hargreaves Lansdown:

"A six month delay in rolling out Help to Buy isn’t a great endorsement of the level of planning and detail that went into the proposal when it was first announced in January 2016. However, we are where we are, and if it isn’t ready to roll out by April, it makes sense to introduce it slowly and test it along the way."

"We can only hope the scheme is worth waiting for. We have seen with the Junior ISA, Lifetime ISA, Help to Buy ISA and pension savings that when you give people an incentive to save, it does encourage them to do so. The fact that this will be run by National Savings & Investments means savers have the comfort of a familiar, trusted brand, which will also help overcome hesitancy over saving."

"The key to the success of this scheme is likely to hinge on whether the attractive incentive will change people’s savings habits at a time when incomes are squeezed, inflation is biting and the target group are pretty much living hand to mouth as it is."

"For those people who don’t qualify for Help to Save, the fact there’s no specific government bonus to reward your savings habits shouldn’t stop you from building an emergency fund. We should all have 3-6 months’ worth of expenses tucked away in an easy access account, so we can handle all the unexpected expenses that life throws at us."

Tom McPhail, head of policy, Hargreaves Lansdown:

"It is good the government is seeking to encourage saving and in particular that it is rewarding those who struggle to save, but it needs to be part of an overarching strategy to promote saving and investing rather than the current piecemeal approach which all too often involves giving with one hand while taking with the other."