Double Your Savings In Two Years!
The government is launching a scheme which could double your savings. How does it work? And how could it benefit you?
If you're already on a tight budget, the prospect of opening a savings account is probably the last thing on your mind.
However, saving could soon become easier for many low income households. That's because the government is finally planning to do a national roll-out of its 'Savings Gateway' scheme.
The scheme is designed to encourage lower income households to start saving regularly, and the government claims it could help up to eight million Brits onto the savings ladder, encouraging them to put money aside by matching contributions made into the account.
Two pilot schemes have already been conducted, where the government matched savings put into accounts - in some cases on a £1 for £1 basis. These proved successful, and the government now hopes to roll the scheme out fully by 2010.
So How Does It Work?
The Savings Gateway account will be offered by banks, building societies and credit unions, running for a period of two years. It is proposed that matched savings would be capped at £25 per month, although the level at which your savings would be matched remains undecided.
During the pilot schemes, individuals' savings were matched at levels ranging from 20p, 50p and £1 for every £1 saved.
On maturity, the government will top up the amount you've accrued. If savings are matched fully, you could end up with £1,200, giving you a nice little nest egg for your future.
Who can take part?
Again, this needs to be finalised, but if the piloted schemes are anything to go by, you would need to be in receipt of one of the following benefits to qualify:
Working Tax Credit
Child Tax Credit at the maximum rate
Incapacity benefit or Employment and Support Allowance
During the two piloted schemes, the accounts were only available to those with household incomes of less than £15k and £50k respectively. It is likely that in order to qualify for the nationwide scheme, your income would need to fall towards the lower end of these numbers.
So, for example, although households earning up to £58k qualify for child tax credit, the gateway is likely to remain closed to them, with some fine-tuning inevitable before the scheme is finally rolled out.
Start Saving Now!
So, while that's good news on the way for savers on low incomes, in the mean time there's no reason you shouldn't be rewarded for having good saving habits now. In fact, with savings rates blossoming at the moment, there couldn't be a better time to start stashing that cash.
Dwindling base rates have had little impact on savings accounts, and you can find many offering upwards of 6%.
For example, Abbey's Instant Access Saver pays a juicy 6.5%, and unlike many internet based savings, allows you to operate your account in-branch.
The popular Kaupthing Edge savings account also offers a mouth-watering 6.5%. Both Abbey and Kaupthing require a minimum balance of £1,000 to get this tasty interest rate.
Birmingham Midshires is another good alternative if you're just starting out. The account pays 6.5% on balances from just £1.
So, the incentives of the savings gateway may be a good idea, but why not get in the habit now? Take advantage of the great savings rates available at the moment. That way, you'll already be in the habit of saving when the gateway finally opens.
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