Government savings scheme for low paid takes effect in October

Three days ahead of the Budget, prime minister David Cameron has announced a package of measures designed to improve life chances for the disadvantaged, including increases in the National Minimum Wage (NMW) and a new savings scheme for people on low incomes which will take effect in October 2016

Cameron said the new Help to Save scheme will enable up to 3.5m people to kick-start savings with a government bonus of up to £1200.

The scheme allows anyone in work and in receipt of Universal Credit or Working Tax Credits to save up to £50 a month and receive a 50% bonus after 2 years, worth up to £600. Account holders can then choose to continue saving under the scheme for a further 2 years and receive another £600 bonus.

This will see them earn a savings pot worth up to £3,600 after the full four years of the scheme, with £1,200 coming from the government.

Help to Save will be open to all adults in receipt of Universal Credit with minimum household earnings equivalent to 16 hours at the National Living Wage (roughly £6,365 in 2017 to 2018) or those in receipt of Working Tax Credits.

People will be able to make withdrawals while they have money in the account to cover urgent costs and there will be no restrictions over how Help to Save funds can be used.

Cameron also announced that the government will provide £12m over the course of the current parliament for a new investment fund to build mentoring capacity to support young people who are at risk of under achieving or dropping out from education. The fund will be managed by The Careers & Enterprise Company.

The money will be used to scale up proven mentoring programmes to reduce disengagement among young people in the years before they sit their GCSEs. It will prioritise young people stuck in ‘cold spots’ across the country who do not currently have access to mentors.

The Careers & Enterprise Company will work to encourage business people and professionals to volunteer to act as mentors, with Cameron suggesting that once established 25,000 young people a year will receive extra support from high-flying professionals, including accountants.

In addition, there is an uprating of the NMW for 21-24-year-olds by 3.7% to £6.95 an hour; 18-20-year-olds will see their minimum wage rise by 4.7% to £5.55 an hour; the minimum wage for 16-17-year-olds will rise by 3.4% to £4.00 an hour; and apprentices will see their wage rise by 3% to £3.40 an hour.

The rises will take effect in October 2016.

The government says it will consult shortly after Budget on its framework for implementation and detailed policy design issues relating to the new savings scheme and the mentoring proposals. Help to Save accounts will be available no later than April 2018.

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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