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Has Help to Save been intended catalyst for savings culture in UK?

5 March 2019

More than 90,000 people have signed up to the Government’s new savings account Help to Save since its launch last September but has it been the intended success in stimulating a savings culture?

The scheme, designed to help working families on tax credits or Universal Credit build up savings, offers savers a 50% bonus on every £1 saved over a four-year period. Savers can put aside between £1 and a maximum of £50 every month.

Figures published by HM Revenue & Customs showed 64,350 people have so far made deposits, totaling more than £13 million.

Kate Smith, head of pensions at Aegon, called the numbers “encouraging.”

She said: “The scheme will help people develop healthier saving habits and in the long term will hopefully inspire them to consider other savings such as workplace pensions and ISAs. In the current low interest rate environment, cash saving won’t always feel rewarding, but with the government bonus, this scheme is very attractive.”

HMRC’s figures indicate that each person has, on average, saved around £144. With the government bonus, this adds up to £216. However, industry experts were agreed that more would need to be done to encourage healthy saving habits going forward.

Smith said: “Although this is a good start, we would encourage people to save more to maximise the government bonus as the scheme has a very limited shelf life, particularly as savings won’t be tied up.”

Jane Goodland, corporate affairs director at Quilter, said of the scheme: “Although uptake is relatively low right now, policymakers deserve some credit for bringing it to life and it should be given time to develop. HMRC’s research shows that there are many barriers to saving that need to be addressed and it is not enough to assume that an incentive to save is enough in itself, no matter how generous the bonus.”

Goodland said “so much more” can be done to give people the confidence and basic financial know-how and called on the Help to Save scheme to be combined with a “sustained effort” to improve financial awareness and education.

She added: “Saving is not part of our DNA right now and is under threat from a consumer culture that makes it easy to spend at a tap, or take a loan in minutes. The Help to Save initiative and others like it will be more powerful if they are combined with financial education in primary schools so that future generations understand the benefit of saving for the long-term. A lofty goal, but one we should be aiming for.”

Tom Selby, senior analyst at AJ Bell, was less enthusiastic about the response to the scheme, describing it as “something of a damp squib.”

Selby said: “While it is clearly positive over 60,000 people have benefited from a 50% top-up on money saved through the scheme, that s a small fraction of the 3.5 million 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.”


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