Record numbers sign up for free £1,200 savings boost during lockdown

Since coronavirus struck, a record number of people have signed up to a scheme that offers to add 50% to any money you save up to a maximum of £1,200 – how to get involved yourself

Two years ago the Government launched a scheme designed to encourage people on benefits to build up some savings of their own.

Help to Save promised to add 50% on top of money you put away, up to a maximum of £1,200, to people on universal credit or working tax credit.

But despite the generous terms it never proved that popular – at least until now.

In the six months since coronavirus started wreaking havok with lives and livelihoods across Britain new records have been set for new accounts opened (59,800), people paying in in any given month (132,000) and the highest total deposits over a six month period (£32.1 million).

Sarah Coles, Hargreaves Lansdown personal finance analyst, said: “With their lives turned upside down and their finances stretched to breaking point, you’d have thought the last thing on many people’s mind will have been the fact they might now qualify for a savings scheme.

“However, the uncertainty of life and the value of a safety net were also becoming far clearer, and people realised the value in having something to fall back on.”

But even after all that, millions are mission out on the potential benefits.

In July 2020, some 5.6 million people were claiming Universal Credit, compared with 2.2 million in the same month in 2019.

That means just one in 25 of those eligible are taking advantage of the scheme.

“Hundreds of thousands of people are likely to have qualified for the first time,” Coles said.

“Lockdown pushed over 2 million people onto Universal Credit: around a million of them are still claiming, and a big chunk of them will be eligible.”

Coronavirus has also seen many of those who’d already signed up dip into their accounts in times of need.

“A record £13.3 million was withdrawn over the six month period to help people make ends meet. This isn’t a sign that the scheme isn’t working – it demonstrates the value in having a savings buffer,” Coles said.

Launched in 2018, the Help to Save adds 50p to every £1 saved over four years.

It’s available to people claiming working tax credit or universal credit.

Accounts can be opened directly with the Government from as little as £1 and are held by National Savings & Investments (NS&I).

You can pay in up to £50 a month, take breaks if you need them and withdraw money penalty free.

The bonus is paid after two years – adding 50% to the highest balance you’ve had in the account – and then again after another two on the money you’ve added to the highest amount before the first bonus.

“The fact that you can start from £1 a month, and you can get your hands on the cash at any time, means there’s no harm in trying to save,” Coles said.

“The fact that bonuses are based on your highest ever balance rather than the balance at the end of the period also means you won’t be punished for having to withdraw cash along the way.”

Jane Goodland, corporate affairs director at Quilter, said: “ Even if you are only able to contribute a small amount each month, it is the first step to building up a financial safety net and will encourage a positive savings habit once you get back into employment and can begin to contribute more each month.

“If you are able to find employment later on down the line, you will still be able to save into the scheme and could generate a £1,200 bonus if you save the maximum amount of £2,400.

“It is times such as the present which emphasise the need for people to have an adequate savings buffer to manage financial shocks without having to turn to high-interest credit.”

However the system isn’t quite without risk – if your Help to Save cash pushes you over £6,000 in personal savings, it could affect your eligibility for some benefits or see payments reduced.

James Andrews

source:mirror.co.uk