Help to Save scheme extended: who is it for and is it worth opening?
A scheme designed to help lower-income households build up a savings pot will be extended to April 2025, HMRC has announced.
The government-run Help to Save is similar to an instant access account, but instead of earning interest customers are given a 50% cash bonus at the end of two and four years, worth up to £1,200.
The initiative, which was originally due to end in September 2023, is aimed at helping people whose financial circumstances mean they might struggle to put any money aside for an emergency.
But with inflation still high and the cost of living crisis continuing to squeeze budgets, is this account really the best choice for cash-strapped households?
How does Help to Save work?
Savers can deposit between £1 and £50 a month and there are no restrictions on withdrawals.
A tax-free cash bonus is then paid after two and four years into a nominated account.
- After two years: you get a 50% bonus worth up to £600. This is based on the highest balance during the first two years.
- After four years: a second 50% bonus is paid, again worth a maximum of £600. This is based on the difference between the highest balance in years three and four and the highest balance during the first two years.
This means that someone saving £2,400 - the maximum amount they could deposit over four years - could receive a £1,200 bonus from the government.
Just bear in mind that the bonus is paid into your nominated bank account, not the Help to Save account. That means it won't count towards your final savings total. Also, if you don't continue to save after year two and increase your balance, you won't be eligible for the second bonus at all.
Help to Save example
Let's say you reached a savings peak of £1,000 in years one and two, but had to withdraw £500 within that time. You would have £500 left in the account but you'd still get a bonus of £500 for that period. That's because the bonus is based on 50% of the highest amount saved, which was £1,000.
Now, let's say in years three and four you tucked away another £800, but didn't take any money out. Despite your savings pot now being worth £1,300, you would only get a bonus of £150 for those final two years. That's because it is calculated as 50% of the difference between your two highest balances (£1,000 in years one and two and £1,300 in years three and four).
- Find out more: what are the different types of savings account?
Who can open an account?
To open the Help to Save account, you need to be a UK resident and receiving:
- Working tax credit
- Child tax credit - and you're entitled to working tax credit
- Universal credit - and you (with your partner if it's a joint claim) have an income of £722.45 or more in your last monthly assessment period.
To open an account visit the Help to Save website and sign in using your Government Gateway account details. You can also use the HMRC app. Alternatively, call the HMRC helpline on 0300 322 7093 and an adviser will help set it up for you.
The Help to Save account is run on the National Savings & Investment (NS&I) platform, meaning your money is protected by the government.
Since launching in September 2018, Help to Save has seen 359,200 customers open savings accounts. HMRC estimates that an additional 3 million people could still benefit from the savings scheme as a result of the extension.
How does Help to Save compare to other savings accounts?
Savings rates are currently booming, thanks in part to 12 consecutive Bank of England base rates rises and increased competition from so-called challenger banks.
So while Help to Save's promise of a cash bonus is tantalising, could interest earned in a traditional instant access savings account work out more overall?
This table shows the top rates instant-access savings accounts, ordered by term.
| Account | AER/EPR | Terms |
|---|---|---|
| Chip Instant Access powered by ClearBank | 3.82% | £1 minimum deposit |
| GB Bank, Raisin UK - Easy Access Account | 3.7% | £1,000 minimum deposit |
| Shawbrook Bank Easy Access | 3.65% | £1,000 minimum deposit |
| Ford Money Flexible Saver | 3.6% | £1 minimum deposit |
| RCI Bank UK Freedom Savings Account | 3.6% | £100 minimum deposit |
Source: Moneyfacts. Correct as of 24 May 2023, but rates are subject to change.
As you can see, the top rate currently on offer across all types of account is 3.82% and, like Help to Save, only needs £1 to open.
If, like Help to Save, you were to open a Chip Instant Access account with the maximum £50 deposit and topped it up by the same amount every month for two years, you would only earn a total of around £45 in interest. That's also assuming that you don't withdraw anything and the bank doesn't change the rate during that time - because the rate is variable, there's no guarantee of that.
Help to Save therefore offers a much better deal for savers with only a small amount to spare.
Too squeezed to save
The aim of the Help to Save scheme is to get even the most cash-strapped households into the habit of putting a little aside every month in case of an emergency. But there are concerns over whether saving should be a priority for those hit hardest by the cost of living crisis and struggling to stay above the breadline.
Myron Jobson, senior personal finance analyst at online investment platform Interactive Investor, says: 'If you are on a low income, the problem is that you have little, if anything, to spare to save at the end of the month.'
He adds: 'For those who can afford it, a 50% savings bonus is too good a carrot to pass up. Those on a low income should consider whether saving is a priority if it would mean they would have difficulty meeting outstanding debt commitments, particularly priority debts such as council tax, as a result.'
- Find out more: how to find the best savings account
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