New Government Ideas: Help to Save

The government has today announced a roll out of a scheme called Help to Save.  Only open to those lucky enough to be in working tax credit or universal credit.

It can allow you to save between £1 and £50 every month, with the bonuses added at the halfway point and at the end of the four years. £2,400 is the maximum an individual can save, with a maximum £1,200 bonus. The government estimates that the scheme will cost the Treasury £255m by 2022-23 (Guardian Link).

On the face of it, it’s hard to see how malevolent this scheme could be.  These are people who often have to access payday lenders like Wonga, foodbanks and other forms of charity.  I’ve never had to do that and it must be humiliating and something you only do out of desperation.  I understand that with kids, the list of things that you need is non-exhaustive and it must only get worse as they get older – with school trips, classes, sports equipment, cinema tickets, money for sweets.  Money must be tight for them and that’s why they fall into debt and living in debt is a terrible way to live.  For some people, the debt burden can cost them hundreds of pounds a month – thousands of pounds a year.  Couple that with the reduction in cheaper social/council housing and the high cost (and lack of security of tenure) in the private rental sector – it’s not a life that you would want to live.

However, the government has a responsibility to encourage people to save – bit it in pensions, ISAs, repayment mortgages.  They come up with the fiscal regime and it should be used to encourage self-reliance and independence.

But often government scheme have unintended consequences, one the fiasco that is Help to Sell Help to Buy – which ended up just increasing house prices, boosting house builders profits and leaving “homeowners” trapped in their shitty little Barratt boxes.

But for Help to Save, another way of thinking about it is that if you are in receipt of benefits and you can afford to save, shouldn’t your benefits be cut instead of giving you 50% extra free (paid for by you and me)?

Now GFF is a little annoyed because I just found out that with a British wife and two kids (on the way), I could have arranged my finances to take advantage of the generous Tax Credits system but unfortunately, where I live is now in a Universal Credit area and since our Assets are above £16,000 (which bizarrely not including housing equity and pensions) we get a big fat ZERO.  We could have maxed out our pensions, gone part time and taken in thousands in “tax credits” under the old rules – like millions of people do right now – and that’s the legit way of doing it.  The fraudulent way has been well known for over 15 years now.  On tax credits I am not happy but I can’t really complain, I have more money than is allowed – it’s almost government wants you to be poor and work until you die. For a lot of people, working full time – especially if you have kids makes little sense – with the associated costs of working, you end up paying to work.

I know that managing family finances is difficult and if you are living paycheck to paycheck then it must a stressful life.  Our position is that we can’t access tax credits but I would rather have the assets than the credits and hopefully I’ll have FIRE‘d before long and the tax credit gravy train will run off the tracks at some point (or your kids will grow up and you’ll lose them or the government changes the rules).  Better to focus on saving, investing and early retirement than keeping up with the Jaxons on benefits street.

Anyway, if this new Help To Save helps live within their means, save some money and improve their lives then it is a good thing and should be encouraged as a step in the right direction.  It’s a modest amount of money for the government to spend (£255m) – given that the state pension & welfare spending is around a thousand times that.  It doesn’t help me and I think that it won’t do much to get people off welfare dependency in the UK but if it keeps people away from pay day lenders in the long run – then it’s a nudge in the right direction.  You might even think that it’s a small beer compared to high income benefits like EIS/VCT, Pensions tax relief.

Maybe it’s just one of the leaks from the Chancellor’s Autumn Statement which is coming.  Expect more freebies, tax changes and gimmicks like the good for me but not a great idea LISA.  It’s an ever changing landscape and I believe that you (sadly) must be aware of the system, how it works and how to make it work for you.



P.S. Update after thinking about what DIYInvestor said. With the message toned down a bit.

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