A WHOPPING 3.4million people may be missing out on £1,200 by not signing up to the Help to Save scheme.
New figures published by HMRC today reveal that just 90,000 people have taken out a Help to Save account and only 64,350 people have deposited cash into the account.
Getty – Contributor Around 3.4million people could be missing out on £1,200 from the Help to Save scheme
But as the Government estimated that 3.5million people could benefit from the scheme when it launched in September 2018, that means there’s more than 3.4million people missing out.
Help to Save is available to people on tax credits or Universal Credit who work at least 16 hours a week on at least the national living wage.
Under the scheme, you can save between £1 and £50 a month for four years from the date the account is opened – money can be withdrawn at any time but this will affect the size of the bonus.
After two years, savers get a 50 per cent tax-free bonus on the highest balance they’ve achieved. If they continue saving for another two years, they could receive another 50 per cent tax-free bonus.
What are the different accounts for saversWE take a look at the best-paying accounts on the market which will give you the most bang for your buck
Fixed rate accounts: Fixed-rate accounts will typically offer better rates than normal, easy access accounts, so if you know you can afford to tie your money up for between one and five years, it’ll be worth looking at these type of accounts.With these accounts you’ll always need to check how much you need to open the account with – some have really high limits which won’t be available to most people.
Current account savings: Rates are much lower on these accounts than in previous years. Yet you can still beat the easy-access rates above on small amounts, and some even offer security of rate. The advatange is once the account’s opened, these are locked in, regardless of base rate cuts or banks lowering rates.
Isa accounts: An Isa (Individual Saving Account) is a tax-free way to save or invest. So, if you’re starting to think about saving or investing, it could be a good place to begin. Here’s our guide to the best Cash Isa accounts in 2019.
Easy-access savings accounts: So-called easy-access accounts are meant to be the most straightforward way of putting cash aside for a rainy day. But often the eye-catching top rates are only valid for a limited period of time, after which they drop. If you want to make the most of the bonus offer, you need to make sure you set a reminder to move your cash to avoid being caught out by this “teaser rate”. Alternatively, you can also go for an easy-access account that promises longer-term returns. Here’s our round-up of the best easy-access accounts.
So if you saved the maximum of £2,400 over four years, you’d get £1,200.
This is a much higher effective rate of interest then you’d earn with a regular savings or bank account.
The interest paying current account, for example, pays 5 per cent, while the top easy-access savings account pays 2.51 per cent. The top Cash Isa pays 1.44 per cent. We round-up the Top Cash Isa rates for 2019.
You can apply for Help to Save via your Government Gateway account.
But experts say the lack of people using the scheme is disappointing.
Tom Selby, senior analyst at investment company AJ Bell, said: “Given the hype around the Help to Save initiative ahead of the 2016 Budget, it is hard to escape the conclusion the programme has been something of a damp squib.
“While it is clearly positive over 60,000 people have benefited from a 50 per cent top-up on money saved through the scheme, that is a small fraction of the 3.5million who could have claimed.
“Given the scheme is aimed directly at those on the lowest incomes, it is perhaps little surprise take-up has been so low.
“If you are on benefits and struggling to make ends meet, even a significant savings carrot will make little difference to your spending decisions.”
Getty – Contributor Experts say that maybe people simply don’t have the cash to save
Becky O’Connor, personal finance specialist at financial provider Royal London, added: “The 90,000 accounts opened represents just 2.5 per cent of the total 3.5million the Government said would be eligible.
“This suggests that either not enough people know about it or millions are too poor to save.
“If you can and you are eligible, this is a great way to save, as the Government gives 50p for every £1. As incentives to save go, that’s hard to beat.
“But these figures suggest that millions of low income earners just don’t know it exists.”
But HMRC points out that the number of people taking out the accounts is on the rise. A spokesperson said: “The number of account holders and those making deposits is increasing all the time, and we expect this to continue.
“Independent research has shown that Help to Save is effective in encouraging people to save, and has made saving seem achievable, affordable and worthwhile.
“But we recognise that saving with Help to Save might not be appropriate for all of the eligible population at any one time.”
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