Help to Save to Launch this October

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June 24th 2018
Week 12
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Help to Save to Launch this October

Government savings scheme pays bonuses of 50 percent on deposits.

The Help to Save scheme will provide people on low incomes a new savings option. The tax-free Government account allows people entitled to Working/Child Tax Credit or the equivalent Universal Credit an online savings account that will be topped up with bonuses every 2 years.

The account allows a maximum deposit of £50 per month and can remain open for up to 4 years - with bonuses paid at the end of year 2 and year 4.

For example, someone taking full advantage of the account from October 2018 would deposit £50 a month. By October 2020 they would have a balance of £1,200. The government will top up the account with a 50 percent bonus based on the highest balance they achieved, in this case 50 percent of £1,200 means the account balance would be topped up to £1,800. The same person can continue to save for another 2 years so continues saving £50 and therefore receives another £600 bonus in October 2022. Overall they would have deposited £2,400 over 4 years and received total top-ups of £1,200. So upon closing, the savings balance would be £3,600.

Interest/bonuses received from the account are equivalent to 50 percent per year, although not compounded. The bonus is tax-free although deposits made by savers will be from post-tax income.

You can find the pre-tax cost of any expenditure using our Pre-tax Cost Calculator - for example someone earning £17,000 per year who already has expenditure of £1,000 per month and then uses part of their income for Help to Save at £50 per month would be using £73 of gross income to receive £50 after tax. You can see this example and try your own by clicking here.

The account has a few caveats:

  • Accounts will become available from October 2018 until October 2023 only.
  • Accounts can be held for 4 years in total.
  • Max £50 per month deposit - total deposit over 4 years £2,400.
  • Money can be withdrawn anytime but this will affect the size of the bonus payment as it is based on the highest achieved balance in each of the two year periods.
  • People must open an online account through gov.uk.
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