Help to Save bonus
A new ‘Help to Save’ scheme has been launched by the Government to assist those on low incomes.
Savers will get a 50% bonus on the maximum amount they’re able to put away at any point in the first two years, even if they later withdraw some of it.
The scheme pays a further 50% bonus on any increase on an individual’s savings in the following two years: so, if you increase your balance from £300 to £600, at its maximum point, you’d get a £150 bonus.
You can save up to £50 a month, and the total bonus you can receive is capped at £1,200 over four years, after which point the account will be closed.
There are no restrictions on withdrawing money from the account and the entire balance is backed by the Government.
To be eligible for a Help to Save account you do have to meet eligibility criteria.
Am I eligible?
The Help to Save account is only available to those receiving Working Tax Credit or Child Tax Credit payments, or claiming Universal Credit.
Applicants claiming Universal Credit need a monthly household income of £542.88 or more, not including benefits.
You need to be living in the UK or be a member of the armed forces or a crown servant, or their spouse or civil partner.
You can keep using your Help to Save account even after you stop claiming benefits.
Is this an ISA?
The Help to Save scheme is not an ISA, although it has similarities to the Lifetime ISA and Help to Buy ISA which also pay bonuses under specific conditions.
Like an ISA, the bonuses you get paid by the Help to Save scheme are tax-free.
Unlike an ISA, the Help to Save account is only offered by the Government, rather than banks and building societies, and it doesn’t pay any interest other than the bonus.
Furthermore, having a Help to Save account doesn’t stop you from opening another ISA in the same year.
What about my benefits?
This is potentially something of a minefield.
If you already have substantial savings, you should be aware that using the Help to Save account could impact on the benefits you receive.
Total personal savings above £6,000 – which includes the balance in your Help to Save account – could affect how much Universal Credit and Housing Benefit you receive.
However, the bonuses you receive from the scheme will not affect your benefit payments.
What if I’m in debt?
The Money Advice Service recommends that you don’t open a Help to Save account if you have outstanding ‘priority’ debts, such as Council Tax (although having debt doesn't preclude you from applying.
It’s also worth paying off credit card debts before saving, as the interest rates on these debts could wipe out any bonus you’ll get from the Help to Save scheme.
However, other debts such as student loan debt might be less of an issue, as payments do not kick in until you reach a certain income level (check the SLC’s website for more).
If you’re struggling with debt, we’ve put together a list of places where you can get free debt advice.
How do I apply?
You apply for the Help to Save scheme through your Government Gateway account. You can set up a Gateway account online: you’ll need to link to a UK bank account.
You can manage your account online or by using HMRC’s smartphone app. You can pay into the account by bank transfer, standing order or using your debit card.
Your bonus payments are paid into your linked bank account, not the Help to Save account itself.
Is this the best way to save?
If you are eligible and have some money to set aside, it's highly unlikely you'll find a more profitable savings account.
The 50% bonus you’ll get paid through Help to Save completely dwarfs the interest rates on easy-access ISAs, which are currently 1.36% or less.
That said, Lifetime ISAs can potentially pay bigger bonuses over time – up to £1,000 a year, with no all-time cap – but that bonus can only be accessed when buying a house or retiring: any other use will incur a 25% penalty.
If you can only put a little money away, but aren’t eligible for the Help to Save scheme, have a look at our guide to savings accounts.
You can compare the interest rates on different savings accounts here.