Adam Butler, Public Policy Manager at StepChange, the debt charity, looks at how the Government’s Help to Save scheme might develop.
StepChange research shows that having some savings set aside dramatically reduces the likelihood of experiencing problem debt. Despite this, a recent YouGov survey for the charity found that 40% of UK adults would not be able to meet an unexpected £1,000 bill without borrowing. This jumps to 77% for those who are receiving Universal Credit.
When looking at support provided for households to build financial resilience, UK savings policy looks lopsided. The Resolution Foundation estimates that the richest tenth of households receives, on average, just under £800 from government support for savings such as ISAs, which is 20 times that received by the poorest tenth of households (£38).
The Help to Save scheme was launched in 2018 to support households with low incomes to build savings. Broadly, those eligible for the account pay up to £50 each month into the scheme. After two years, a bonus of 50% of the highest balance during that period is paid, and a further bonus is paid on the same basis two years later (when the account is closed).
Those eligible can access up to £1,200 in bonuses over four years if they pay the maximum amount into the scheme. Eligibility is based on receipt of Universal Credit or tax credits, and a minimum income from work.
Customer experience research shows that most Help to Save users are happy with the scheme and that it has helped them to save regularly: 71% of account holders surveyed said they save more, 65% said they save more often than they did before, and 56% said they were more likely to save in future.
But take-up has been much lower than anticipated. The Government estimated that 3.5 million people would take up the scheme, but, in 2023, only around 350,000 people had an active Help to Save account -a take-up rate of around one in ten. Even allowing for unanticipated cost of living pressures, the scheme is not reaching enough of those it is intended to help.
How can the scheme be improved to increase take-up?
There are a number of promising options.
Most current users of the scheme save the maximum £50 amount, suggesting that those who cannot save that much may be reluctant to open an account because they do not want to miss out on the maximum bonus (once an account is set up, the clock is ticking on the four-year account lifespan). Rethinking the scheme’s somewhat complicated design and extending the four-year limit to increase flexibility could help address this problem.
Improving awareness could also help. The Resolution Foundation has suggested that all new benefits claimants could automatically be given a Help to Save account, with a small bonus to ‘kickstart’ saving.
Currently, a Help to Save account can only be opened online. Credit unions, which are based in local communities, would like to be more involved and allow eligible individuals to open the account in their branches. Elsewhere, NEST is trialling an opt-out sidecar savings scheme, where a proportion of auto-enrolled pensions saving accumulates in a pot that can be accessed at short notice. Better integrating Help to Save with the wider savings ecosystem would likely increase take-up.
Finally, widening access by introducing income-eligibility criteria alongside receipt of means-tested benefits would help reach those with low- to middle-incomes who are not receiving benefits but have low financial resilience. The in-work requirement, the purpose of which is unclear since it is only necessary to be in work at the point of application to qualify for an account, could be removed.
The Help to Save scheme will remain open on its present terms until April 2025. While much of the scheme is sound, a rethink is needed to increase take-up and meet the scheme’s intended purpose of supporting saving among those with low incomes.
