In the just released budget speech by the Chancellor George Osborne, government has outlined a scheme to help low income earners save more money. The scheme enables people who claim working tax credits or universal credit to save up to £50 a month and pocket a bonus of 50 per cent, earning a maximum of £600 after two years. The scheme can be taken up for up to 4 years thus meaning that a regular saver can get a bonus of up to £1,200!
If I was eligible for the help to save scheme, I would be licking my lips. No where else can you get returns of 50% on your money. If I was a working tax claimant/universal tax claimant, I would opt to save in tho scheme above any other form of saving – include dare I say it a Pension. Even after receiving an employer match and a tax top-up in a pension, there is no way you will be making returns of 50%!
Now I know the general consensus has been that most people on working credits don’t have £50 to spare to put into savings every month. If I was in the position and did not have an extra £50 a month, I would simply reduce my pension contribution by £50 over this help to save time period and divert the money into a help to save scheme. This is of course my opinion and it is not advice.
From a savings point of view, it is not only the tax credit claimants benefiting. It has already been announced that from 6 April 206, everyone gets a tax free allowance of £5000 on dividend income. Additionally, lower rate tax payers can get £1000 worth of interest tax free a year whilst higher rate payers can receive £500 in interest a year tax free.