The government has launched its delayed help-to-save scheme, intended to help low-earners accumulate savings by rewarding them with an extra 50p for every £1 saved.
Announced in January 2016, the scheme was originally intended for launch in April 2018 - but late last year the government confirmed a six-month delay to the project.
The help-to-save scheme is now available to UK residents who are entitled to working tax credit and universal credit, following an eight-month pilot which saw more than 45,000 customers deposit more than £3m in the scheme.
Help-to-save accounts will last for four years, with holders able to save up to £50 every month, to then earn a government tax-free bonus of 50 per cent to be paid after two years.
If account holders continue to save after two years, they will receive another bonus after four years - HM Revenue & Customs calculated that on a maximum savings of £2,400 over four years, the overall bonus would be £1,200.
John Glen, economic secretary to the Treasury, said savings should not be considered a luxury - they are an essential part of planning for the future.
He said: "But for some, putting away even a tenner each month can be a tough habit to get into - whether you are saving up to take the family on a much-needed holiday, or to take the next step in life, help-to-save is designed to make saving possible for every hardworking person in this country."
Kate Smith, head of pensions at Aegon, welcomed the launch of the scheme and said in targeting people in receipt of working tax credits or universal credits, it had the potential to make more people more financially resilient.
She said: "Although the scheme only runs for four years, getting people in the savings habit will ultimately help them in the longer term and hopefully encourage them to consider other savings such as workplace pensions and Isas.
"In the current low interest rate environment, cash saving won’t always feel rewarding, but with the government bonus, this scheme is very attractive."
However, Ms Smith said judging by the trial run people were still not saving enough.
She said: "Although this is a good start, we would encourage people to save more to maximise the government bonus as the scheme has a very limited shelf life, particularly as savings will not be tied up."
Anna Bowes, director at Savings Champion, said: "Whilst this is a great idea in theory and the very generous bonus should be a huge incentive, the problem is that the people who this is targeted at are still going to struggle to find any money to put away.
"But if it can encourage people to save something, however small, that will be positive."
rachel.addison@ft.com
