Help to Save scheme to be offered to more people

More people on low incomes will be encouraged to save through a scheme that offers a large government bonus, the Treasury has announced.

About three million people on universal credit are currently eligible for the scheme, which sees the government add 50p for every pound saved after two and four years.

An extra 1.5 million parents and carers will become eligible from 2028 and the scheme, which was due to end in 2027, will be made permanent.

The change, to be formally announced in the Budget, comes as Chancellor Rachel Reeves is expected to reduce the amount people can save in cash Isas (Individual Savings Accounts).

Reports also suggest the chancellor will not cut VAT on energy bills, which had been the source of much speculation.

Help to Save is widely regarded as a key incentive for people on low incomes to set money aside for emergencies and to develop a savings habit.

To be eligible to open an account, savers need to be on universal credit and have take-home pay of £1 or more in the last monthly assessment period.

Up to £50 a month can be saved, which is £2,400 over four years.

Bonuses are paid after two and four years, straight into the saver’s bank account. So the maximum bonus after four years would be £1,200. The account closes after four years and no more can be opened.

The bonus relates to 50% of the highest amount saved over the first two years, then the second two years. That is designed to prevent people keeping money in the account when it would be better used making a emergency, or debt, payment.

The scheme will be expanded to an extra 1.5 million savers in 2028 to include universal credit claimants that have children in education or carers that provide 35 hours of care to someone with a disability.

Separately, the amount of money that can be saved tax-free each year in a cash Isa is likely to be cut in the Budget.

The annual allowance is expected to be reduced from £20,000 to £12,000, as the Treasury wants to encourage people to invest instead.

That could help boost growth, a key objective for the government. But there are questions over whether people would naturally put their money into stocks and shares Isas as a result of the less generous tax break on cash Isas.

About a quarter of those who save money into a cash Isa currently save more than £12,000 a year.

Robin Fieth, chief executive of the Building Societies Association, which has campaigned against a cut, said: “A cut to £12,000 will not encourage more people to invest but will add unnecessary complexity, particularly around Isa transfers, and risks damaging the overall Isa brand.

“This may also deter people from saving and investing. The best way to build a culture of investing is on a strong culture of savings.”