Government’s low income savings account officially opens
The Treasury has officially launched the government’s new ‘help to save’ savings account, intended to encourage rainy day savings for people with low incomes, which was due to be introduced in April 2018 but has been delayed
12 Sep 2018
The scheme was originally announced at the Budget in March 2016 and was expected to be available from the beginning of the 2018 tax year. However, the Chancellor’s Spring Statement confirmed the roll out had been delayed to provide ‘the best customer experience possible’.
The launch of the new account follows an eight-month trial, with over 45,000 customers who deposited over £3m.
Help to save is open to UK residents who are entitled to working tax credit (WTC) and receiving WTC or child tax credit payments, and to those claiming universal credit with a household or individual income of at least £542.88 for their last monthly assessment period. Payments from universal credit are not counted as part of household income for this purpose.
Account holders can save between £1 and £50 every calendar month and accounts last for four years from the date the account is opened. After two years, savers get a 50% tax-free bonus on savings. If saving continues there is another 50% tax-free bonus after four years.
On maximum savings of £2,400 over four years, the overall bonus would be £1,200. Bonuses are paid into an individual’s bank account, not the savings account.
Savers can close the account at any time, although they may miss out on a bonus as a result, and can continue to use the account if they stop receiving benefits. Any savings or bonuses earned through help to save will not affect how much WTC individuals receive, and bonus payments will not affect housing benefit or universal credit payments. If an individual or their partner has less than £6,000 in personal savings this will not affect universal credit or housing benefit claims.
John Glen, economic secretary to the Treasury said: ‘Savings shouldn’t be a luxury, they are an essential part of planning for the future. But for some, putting away even a tenner each month can be a tough habit to get into.
‘Whether you’re saving up to take the family on a much-needed holiday, or to take the next step in life, help to save is designed to make saving possible for every hardworking person in this country.’
Help to save accounts are available to open from 12 September 2018 and up to September 2023.
Report by Pat Sweet