AJ Bell expert discusses new 3.5% savings bond
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Help to Save is a Government-backed savings scheme for low income households, providing savers with two tax-free bonuses regardless of how much they withdraw. Those who believe they are eligible are urged to apply for the savings scheme on the Gov.uk website.
The Help to Save scheme is only available to those receiving certain benefits and low income.
The scheme works by providing a bonus of 50p for every £1 savers put away over four years.
Savers are able to top up their savings each calendar month by a maximum of £50 via debit card, standing order or bank transfer.
The Help to Save account automatically closes four years after it has been opened and while savers will be able to keep the money in their account.
However, closing an account will mean they will not be able to reopen it or another Help to Save account.
Accounts can also be closed by savers at any time and they can keep the account even if they stop receiving the benefits that made them eligible for it.
The tax-free bonuses are paid at the end of the second and fourth years based on how much one has saved.
At the two year mark, the first bonus will be paid into the Help to Save account, which will roughly be 50 percent of the highest balance saved.
This repeats at the fourth year wherein savers will receive 50 percent of the difference between:
The highest balance saved in the first two years.
The highest balance saved in the last two years.
In practical terms, if savers are able to put away the maximum each month of £50, they will have saved £2,400 over the four years purely by saving.
But, they will also have earned a maximum of £1,200 in completely tax-free bonus money.
Both bonuses are paid out regardless of how much one withdraws during the time the account is open.
However, if one’s highest balance hasn’t increased between the second and fourth year they will not earn a final bonus.
Additionally, withdrawing money will make it more difficult to grow a high balance in order to earn as large a bonus as possible.
To be eligible for the Help to Save account, one must be:
Living in the UK
Receiving Working Tax Credit
Entitled to Working Tax Credit and receiving Child Tax Credit
Claiming Universal Credit with total household earnings of £617.73 or more from paid work during their last monthly assessment period
Couples that get payments will need to apply separately for Help to Save accounts.
Eligible claimants who are living overseas can apply for an account if they are:
Crown servant or their spouse is
Member of the British armed forces or their spouse is
It’s also important to note that saving money through Help to Save could affect one’s eligibility for other benefits and how much they receive.
For those on Universal Credit or House Benefit, having personal savings in excess of £6,000 will affect their payments, although Help to Save bonuses should not be included in this calculation.
To apply, eligible claimants must use the Government Gateway on the Gov.uk website and be able to provide UK banking details.
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