Wednesday, 12 September 2018

Help to Save Scheme Launched


An area that has concerned me for some time is the proportion of people in the UK who have little or no savings. A large number of people borrow to make ends meet. According to The Money Charity, the average household currently pays over £1,800 p.a. interest each year on personal loans and outstanding consumer credit lending is £213 billion.

In an effort to address this culture, the Government have this week launched their new saving initiative which is aimed at workers in receipt of tax credits or universal credit.

People can save anything between £1 and £50 per month and will receive a bonus of 50% on the sum saved after two years. So someone saving the max. of £1,200 would receive an additional £600. If they continue for a further two years they would get a second tax-free bonus of 50%.

Withdrawals can be made at any time but bonus payments could be affected.

This should be a help to many thousands of families on low incomes and hopefully help them to build a useful cash reserve and importantly get them into the habit of saving regularly and taking responsibility for their finances.

The debt charity Step Change welcomed the launch of the scheme. Its chief executive, Phil Andrew, said: “We campaigned for help to save and it is a good scheme. Ninety-eight per cent of our clients have no savings at all at the point they turn to us, and only 1% have £1,000 or more. Yet we know that having £1,000 in rainy day savings virtually halves the risk of falling into problem debt, so helping lower income working households to build savings should be an important policy goal.”

It is estimated that over 3 million people would qualify for this savings scheme. The scheme will be available for the next 5 years.

16 comments:

  1. Great idea, the only problem is that how do you get these people to save; if they don't have enough money to save and are already paying off loans at exorbitant interest rates, then the incentive will not work. Sounds great on paper, not sure how it will work in reality.

    Don't mean to be a "Naysayer", just being a pragmatist, I wish that it all the success.

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    1. I read they ran a pilot scheme for 8 months which attracted 45,000 customers and deposits of £3 million.

      However, yes it will be difficult for many to save and may not be appropriate to save whilst servicing debt repayments but I hope it will encourage people to think about saving and/or changing spending habits. A 50p bonus for every £1 saved is a decent incentive even if you have to wait two years to get it.

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    2. I initially wrote a response that I couldn't publish. 8 months and 45,00 customers = £66.66 on average. It feel likes a do gooder scheme that somebody who has no idea how the world works has invented and wants to make political capital; if people on benefits can afford to save, then the question has to be should they be on benefits or are they playing the system; as with the LISA it will probably fade away as one of those government schemes that didn't work very well as it wasn't thought through prpoerly like most of their IT developments that fail to implement properly

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    3. I think this scheme has been in preparation for some time as it was originally proposed by Gordon Brown but shelved after the crash of 2009.

      It is for working people on low incomes, generally those earning less than £13,000 per year. Two thirds of people claiming working tax credits are women who are more likely to be lower paid. They can also get help with child care costs without which they may not be able to work.

      The people who dreamed up the scheme may well be civil servants with no direct experience of low paid workers but that alone is not an argument against its introduction. I think this is a decent initiative and deserves to be given a chance.

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    4. I found your response condescending and that I didn't understand the target group, what their circumstances were like or what it was trying to achieve.

      I have seen decent initiatives dreamed up by governments with the best of intentions, but they don't work for various reasons, so forgive me if I am a little jaundiced in my view.

      I never said it shouldn't be given a chance, I just had a view as to why I thought it was not the greatest of ideas. Initiatives are often put forward for very decent reasons such as the Help to Buy scheme, which end up with the wrong result i.e. House prices for these people increased at point of buying and many are now in negative equity and regretting doing what they did.

      As to your reference to a grouping of people, you make it sound that I don't care about this group. I do care, but I think if you asked them what they actually wanted, I think they may well give you a different answer to the one that has been dreamed up by the politicians has more substance e.g. an extra £5 per week to help them meet their needs and which they could possibly save?

      As to your comment that people with no direct experience is not an argument against its introduction. That is not what I said. I questioned their thinking for introduction and had they thought the idea through as to whether or not it would actually achieve the real objective of enabling/encouraging people to save. 2 years to wait for an incentive when you are possibly on the breadline, using Foodbanks and struggling to make ends meet on a weekly basis is frankly the sort of initiative that is dreamed up by people who have no idea what it is like to live in this situation. As to Gordon Brown, the man who infamously said he had abolished the Boom/Bust cycle and presided over arguably the biggest financial blowup in history, least said.

      As I said, I hope it is successful, but I have my doubts that this will achieve what it sets out to do.

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  2. I wrote about this earlier. It is only open to people who receive tax payer funded "Help to Live" benefits (tax credits / universal credit).
    So, if you don't spend all the cash the government give you for free, you can have 50% extra.
    It has an intention but maybe the government should stop trying to help everyone.

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    1. I just clicked through and read your article. You come across as harsh and unsympathetic to people on benefits.

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    2. My take on his article wa that the government introduces schemes then withdraws them (at least that was my experience) and you find yourself forever not getting them, but hey-ho thats the way the world works; for those that are genuinely poor I dont think this will work, for those who prefer to spend their money on 50 inch TVs, it may hopefully change their habits, but I won't hold my breath

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    3. maybe a little harsh - I might need to tone it down a bit - however, I stand by my point that whilst this Help to Save scheme has good intentions it won't solve the root cause of poverty/needing to be on benefits and it might end up being a waste of the government/civil service's time to come up with the scheme, roll it out, manage it and then change it in a few years or drop it altogether.
      The benefits system in the UK is warped, the name itself if Orwellian and it should be reformed but it won't because like a drug that millions of people are hooked on whilst those who don't have access to these benefits have to pay for it.

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    4. I don't think anyone is claiming it will solve poverty but it is a very small step in the right direction which will help those nearer the bottom of the ladder.

      The reasons underlying our welfare state are extremely complex...genes inherited from parents, education, inherited wealth, drug addiction, mental health, availability of work, cultural norms all interplay but surely the mark of a civilised society comes down to how our welfare and taxation system supports those most in need. The people who, for whatever reason, find themselves at the bottom generally have far fewer opportunities in life compared to those at the top. Of course there will always be those who 'play' the system and abuse it but that is no different to those at the top who play the system.

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    5. I would agree with that - and add that we shouldn't hate the player but hate the game / love the sinner abhor the sin / play the ball and not the man.
      Quite often, you wouldn't choose to be in the position of welfare dependency and there is little hope of escape - I say this as someone from a deprived area and now living in a similarly deprived area.
      The cost of this scheme is small in the grand scheme of things - so hopefully it'll have some extra benefits in the long run and even more so - stop the scourge of debt that blights so many people's lives.

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    6. You really threw everything into the pot. There are many forms of welfare state and ours is classified as a liberal welfare state system, not the most generous https://www.pitt.edu/~heinisch/concept.html. As you say the reason for people ending up where they are complex and some are not solvable. But if one excludes the extremes, then where there is an ability to make a choice then it is up to the person to make a choice and wherever possible create the opportunities. I speak from personal experience of parents from lower social working class, my father had no qualifications when he left school (my mother did) and created opportunities for themselves and for their children. More importantly you mention "stop the scourge of debt that blights so many people's lives", this scheme does not do that. It incentivises people to save, it does not stop them getting into debt. They can still take out debt whilst still saving e.g. buy the next 50 inch TV, then when things go wrong they are still in trouble. I know lots of people who are in a good situation who take out debt that is servicable then find themseles in a situation where it is not. So the scourge of debt is not always something that is forced on people but can sometimes be a choice that is fine until it goes wrong and creates havoc. Taking out debt is the crucial issue, but society now encourages debt, not the incentive to save. Either you will save or you will not, an incentive is unlikely to stop the incentive to take on debt.

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  3. Anything that encourages people to save and help them get out of debt is a good thing.

    I'm not sure how successful it will be however and tend to think that if it was like the pension auto-enrolling, ie you have to opt out of saving, it would be more successful.

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    1. That's an interesting idea weenie. I imagine many of the target savers will already be enrolled in their workplace pension, well those earning over £10K. From next year 5% of their earnings (after the disregard amount) will be deducted from pay towards their pension.

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  4. When I was on a very low income, I was still managing to save a few pounds a month and would have appreciated something like immensely as it would helped lift me out of poverty, given me a bit of a buffer for emergencies and reinforced the saving habit.

    I can think of one or two other people it might have helped to. Will it help those who are desperately poor? Probably not, but it be enough of a nudge for those on the margins.

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    1. I think there will be many thousands of people who, like you, would like to put aside something each month and will welcome this incentive. As you suggest, a nudge in the right direction.

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