- FOI shows only 143,000 people make the most of Help to Save
- That’s only around 2.5% of eligible population at a generous estimate
- Greater awareness of the scheme could have meant households had a buffer going into the current cost of living crisis
- Eligible savers can get a 50% bonus
- Money can be taken out when needed without penalty
Only around 2.5% of those eligible to use the Help to Save scheme are making the most of the generous perks on offer, new figures show.
Obtained by investment platform AJ Bell, FOI data from HMRC shows just 143,000 Help to Save account holders have saved the maximum amount of £50 a month since opening their account.
Help to Save, which launched in 2018, allows individuals in receipt of Universal Credit or Working Tax Credit to open an account. Up to £50 a month can be saved in the account, with a 50% bonus paid after two and four years, regardless of whether they have withdrawn the money in the meantime. The maximum that can be saved is £2,400 over four years, topped up to £3,600 with the additional bonus*. It is the most generous government savings and investment perk available to eligible low-income households.
A total of 359,000 accounts have been opened to date, according to HMRC. Although over 48,000 of those accounts have never received a deposit. The 143,000 account holders maximising contributions equates to around only around 2.5% of those eligible to use the scheme, with 5.6 million Universal Credit recipients able to open an account. Uptake rates could be even lower once those on Working Tax credits or who are no longer receiving Universal Credit are factored in*.
AJ Bell head of personal finance Laura Suter says it shows government should focus on raising awareness of existing schemes before tinkering with new proposals:
“Only a tiny proportion of those eligible have opened a Help to Save account. There are more than 5.5 million Universal Credit claimants but the figures show that only an estimated 6.5% have opened a Help to Save account and just 2.5% are making the maximum from it. That is a generous estimate – once you factor in those still on Working Tax credits and people that could have opened an account but are no longer receiving tax credits the uptake figures are likely much lower.
“The reality is that the scheme has been poorly advertised, so lots of people aren’t aware of the perks on offer if they were able to put a bit away each month. This is coupled with the fact that lots of people on benefits just don’t have spare money to put away each month, even if they wanted to. These figures also pre-date the current cost of living crisis, and it’s inevitable that the number of people saving the maximum £50 a month will slump this year, as will the number of people using the scheme at all.
“To date, over 85% of people who have opened a Help to Save account have made some contributions and 40% are putting in the maximum amount. So in some respects the scheme is doing a lot of good, with those 143,000 people saving the full £50 a month on track to get a £1,200 savings top up. That could provide them with a rainy day fund, and become a stepping stone to saving and investing more in the future.
“But had the scheme been better publicised in recent years, more households would have been incentivised to save regularly and would have had a rainy day fund going into the current financial crunch. The Government has put minimal money behind marketing Help to Save, meaning many of those who had cash to spare in the past few years didn’t realise they could get this generous boost to their savings.
“Amid the current throng to suggest new policy and tax cuts in the Conservative leadership race, it shows that the government could be focusing more on promoting existing schemes, making people aware they exist and who is eligible, rather than tinkering with new ideas before current savings perks are working.
“Just last month Prime Minister Boris Johnson went on record to state that his government was considering exempting Lifetime ISAs from Universal Credit eligibility checks in order to help low income households use them to save for a house. But this data shows that just a fraction of low income households are making the most of a more generous scheme that is already in place – Help to Save.
“Only those 2% or so of Universal Credit and Working Tax Credit recipients already maxing out their Help to Save allowance should sensibly consider a Lifetime ISA as well. And even then, they would need to accrue a total of £16,000 across all their accounts before it impacted their tax credits – which is a pipe dream for many on benefits.
“For anyone who does have spare cash at the moment this is a hugely valuable incentive they can take advantage of. The flexibility of the scheme is one of its massive perks, as savers can withdraw the money whenever they need it and they will still get a bonus equivalent to half of their highest balance, so they aren’t penalised if they need to take out some cash before the two-year bonus period is up.”
*Latest figures show 5.6 million people are in receipt of Universal Credit. 143,000 Help to Save Account holders contributing the full £50 a month since opening their account equates to 2.55%. However, individuals receiving Working Tax credits are also eligible for Help to Save, and a Help to Save account can continue to be used by individuals even when they are no longer in receipt of tax credits, meaning the actual uptake rate is likely to be even lower.
**A full explanation of the Help to Save bonus can be found here: https://www.gov.uk/get-help-savings-low-income/what-youll-get
