HM Treasury has launched a new consultation ‘Help to Save Reform’ which explores how the Help to Save scheme can be simplified and reformed to make it an effective savings product.
The Help to Save scheme was launched in 2018. It offers individuals on low incomes a four-year savings account with a 50% government bonus. A maximum of £50 per month can be saved into the account.
To qualify, individuals must be in receipt of:
- Working Tax Credit (WTC).
- Child Tax Credit (and be entitled to WTC).
- Universal Credit, while having take-home pay of at least £722.45 in their last monthly assessment.
To date, over 350,000 Help to Save accounts have been opened. The savings scheme is currently due to run until April 2025.
The consultation looks at the design of the scheme and how it serves its purpose, along with how it may be simplified.
Consultation questions are in five broad areas:
- Eligibility for the Help to Save savings account.
- Process for paying into the account.
- Length of time for which an account can be open.
- Structure of the bonus payments.
- Options for encouraging a continued savings habit when the account closes.
Kelly Sizer, Senior Manager of the Low Income Tax Reform Group (LITRG) commented:
"Low-income savers have a number of government-incentivised savings schemes available to them beyond Help-to-Save, such as ISAs, Lifetime ISAs and pensions. It can be difficult to understand which savings vehicle, or combination of vehicles, is most appropriate for their saving capacities and needs.
Low-income savers can also have a hard time understanding how their tax liability on savings income is calculated. This is because such individuals face complex interactions between the personal allowance, starting rate for savings and the personal savings allowance. Terminology here can be especially confusing, for example, the personal ‘allowance’ operates in a completely different way from the personal savings ‘allowance’. In considering any policy reform in this area, we urge the government not to introduce additional complexity unnecessarily and we look forward to contributing to the consultation in due course.”
Views are invited from any individuals or organisations with an interest in Help to Save. This might include potential account holders, financial institutions and civil society organisations.
This consultation runs from 27 April to 22 June 2023 and responses should be sent by email to:
1: Considering the focus on working people with low incomes, what changes, if any, would you recommend making to the eligibility criteria to reach the target group? How could that be implemented? Please provide details.
2: Do you think savers should be able to open another account after their first Help to Save account matures or is closed? Should there be any restrictions to doing so? What are your reasons?
3: To what extent does the limit on monthly savings act as a barrier to maximising the benefits and or objectives of the scheme? Without making the scheme substantially more costly to taxpayers, how could this be overcome? Please provide details.
4: To what extent does the restriction on replacing savings that have been withdrawn act as a barrier to maximising the benefits and or objectives of the scheme? How could this be overcome? Please provide details.
5: Do you think the current limitations on ways to pay money into a Help to Save account presents a barrier for savers? If so, how could this be overcome? Please provide details.
6: Do you think running the scheme for four years provides the best value for money for the taxpayer?
7: Could incentivising a regular, long-term savings habit be better achieved over a different time period? Please provide details.
8: To what extent does the bonus structure or calculation method for savers act as a barrier to maximising the benefits and or objectives of the scheme? How could this be overcome? Please provide details.
9: Without making the scheme substantially more costly to taxpayers, what changes, if any, would you suggest to the bonus structure or calculation method to improve customer understanding and uptake? Please provide details.
10: Do you think a change in bonus frequency would make it simpler to understand and/or create a bigger incentive for the target group to save? Please provide details.
11: Are any complexities or barriers caused by paying the bonus to the saver outside of the Help to Save account? What changes would you suggest to the way the bonus is paid to the saver? Please provide details.
12: Are there alternative options to encourage and make it easy to continue the savings habit?
13: Are any complexities or barriers caused by there being one provider of Help to Save accounts? How could this be overcome? Please provide details.
14: Are there any other areas of complexity, barriers or any changes you would suggest for Help to Save that have not been covered in this consultation?
Useful guides on this topic
Help to Save scheme
What is the Help to Save scheme? How does it work?
Savings income: How interest is taxed
What is savings income? How is savings income taxed? What allowances are available?
Savings income: tax-free savings
What types of savings income are exempt from Income Tax? What savings income can be received tax-free? What are the limits?
What is an ISA? What are the limits? How are ISAs taxed?