Key Highlights
- The Help to Save scheme will become permanent and be expanded to include parents and carers.
- 1.5 million more people are expected to benefit from the scheme, making it available to a wider range of low-income earners.
- The bonus system, which offers up to £1,200 over four years for savings contributions, will remain in place.
- Critics argue that only one-in-five eligible households have taken advantage of the scheme since its launch in 2018.
The Context of Rachel Reeves’ Budget Announcement
Rachel Reeves, the Chancellor of the Exchequer, has unveiled plans that aim to ease financial pressures on low-income earners through a new twist on an existing scheme. As she prepares to deliver her Autumn Budget in 2025, the focus is now on the Help to Save initiative, which will be made permanent and extended to include more people.
Understanding the Help to Save Scheme
The Help to Save scheme was initially launched with a specific purpose: to encourage lower-income individuals to save money by offering a bonus for their contributions. According to Treasury sources, 575,000 people have taken up this offer since its inception in September 2018, contributing £588 million into their savings accounts over the four-year period.
The scheme works by providing savers with a bonus of up to £1,200 if they contribute at least £50 each month for four years. This means that for every £50 saved, individuals can receive an additional £25 as a bonus, effectively doubling their initial contributions. However, only one-in-five eligible households have actually used the scheme since its launch.
Expanding the Scheme: A Step Towards Inclusive Savings
Rachel Reeves is now expanding the Help to Save initiative by making it permanent and opening it up to an additional 1.5 million people, including parents and carers on universal credit. This expansion is part of Labour’s broader strategy to address the cost-of-living crisis faced by millions of working people.
According to a Treasury source, “For too long governments have ignored the role of carers and parents in keeping the economy ticking. The Chancellor wants to change that and help millions more working people build a savings habit.” This move is seen as a significant step towards inclusivity, ensuring that those who are often most exposed to financial shocks can also benefit from this scheme.
Expert Opinions on the Scheme’s Effectiveness
The Help to Save initiative has faced criticism for its low uptake. Charlene Young, senior pensions and savings expert at AJ Bell, commented, “The reality is that lots of people aren’t aware of the generous bonus and how it works if they were able to put a bit away every month.” She further added, “This is coupled with the fact that lots of people on benefits or lower incomes are unlikely to have spare money to save each month, even if they wanted to.”
Deven Ghelani, chief executive of welfare group Policy In Practice, echoed these sentiments by saying, “With costs rising, low income families are struggling to stay on top of bills, never mind having money to put aside.” This reflects the broader challenge in encouraging savings among those who face significant financial pressures.
The Broader Implications for the Cost-of-Living Crisis
As part of her wider strategy to tackle the cost-of-living crisis, Chancellor Reeves is also considering measures such as extending a freeze on income tax thresholds. This move is expected to affect millions of minimum wage workers who are set to receive a 4% pay boost in the coming weeks.
Making Help to Save permanent and expanding its reach could be seen as a positive step towards building financial resilience among low-income earners. However, experts argue that broader measures may still be necessary to truly address the cost-of-living crisis.
Grace Brownfield, head of debt advice communications at the National Debtline service, stated, “Making Help to Save permanent is ‘a welcome step – especially extending it to parents and carers who are often most exposed to financial shocks.’ But for many, the biggest barrier to saving is having nothing left at the end of the month, so this must go hand-in-hand with wider measures to tackle the cost of living.”
As we await Chancellor Reeves’ full Autumn Budget announcement on Wednesday afternoon, the focus remains on how these policies will impact those who need financial support most. The coming weeks and months will reveal whether these measures can truly make a difference in the lives of working people facing rising costs.
