Many may feel that trying to save money is a pointless endeavour if their income is low or they receive certain benefits. Current and savings accounts offered by the mainstream banks and building societies offer poor returns, which quickly get outpaced by inflation. The government seems to recognise this issue as they now provide their own type of incentivised savings account. The scheme itself is called “Help to Save” and it allows qualifying individuals to get a bonus of 50p for every £1 they save over four years. As the scheme is government backed, all savings held within these accounts are secure.
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The application for these help to save accounts is done through the government website. To apply a government gateway user ID and password will be needed as well as existing bank account details.
The account is available for anyone receiving working tax credit, entitled to working tac credit and receiving child tax credit or claiming universal credit and the household earns £569.22 or higher from paid work in the last monthly assessment period.
If payments are received as a couple it is possible for both partners to apply for individual help to save accounts.
The applicants also need to be living in the UK and the help to save account can continue to be used even if benefits are stopped.
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Those on low incomes may find it hard to save (Image: GETTY)
The government provides support for savers (Image: GETTY )
Once an account is set up there are rules in place for how the payment system works.
The account holder will be able to save between £1 and £50 each calendar month but there is no requirement to save anything if not desired.
Money can be paid into the help to save account by debit card, standing order or a bank transfer.
There is no limit on how often you can pay in a month but the monetary limit is £50. It is possible to withdraw money from this account but it can only be done with a registered bank account.
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The bonuses received will come at the end of the second an fourth years and their amount is based on how much was saved.
So, over four years it is possible to receive two tax free bonuses. After the first two years the first bonus will be given and it will be 50 percent of the highest balance that’s been saved.
After four years, the final bonus will be given so long as the account holder continued to save. This bonus is 50 percent of the difference between the following two amounts:
The highest balance saved in the first 2 years (years 1 and 2)The highest balance saved in the last 2 years (years 3 and 4)
While accounts need to be opened individually couples could benefit as a whole from the scheme (Image: GETTY)
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However, it should be noted that if the highest balance does not increase over the timeframes, no final bonus will be given.
Taking all of this into account, the most that can be paid into the savings account is £2,400 over four years with the highest bonus possible being £1,200.
This means that for couples who utilise the accounts effectively, £4,800 can be saved overall with bonuses totalling £2,400. The bonus is paid into the individuals chosen bank account and not the help to save account itself. The government discourages withdrawing money from these savings.
As they detail, it will be harder for the individual to grow their highest balance and earn the largest possible bonus.
Low interest rates on savings accounts have hindered savers (Image: GETTY)
In a worst case scenario, if the individual withdraws too much from the account it could hamper their chances of receiving any bonus at all. The help to save account will automatically close after four years from the opening date.
It is not possible to reopen the account beyond this and applicants are currently limited to one account each. Once the account is closed however it is still possible to keep the money within it and make withdrawals.
It’s important to note that, according to the government, saving money through this scheme could effect eligibility for other benefits like universal credit, working tax credit and housing benefit.
It may be beneficial to evaluate how potential savings into the account could effect these other areas, weighing up if its worth it overall.