MILLIONS of coronavirus-hit workers will be eligible for a government savings top up worth up to £1,200.
The Help to Save scheme gives a 5o per cent top up on savings of up to £50 a month for four years.
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It is designed to help people on lower incomes start putting money aside, and is available for workers on certain benefits.
Over 1.8million new people have signed up to Universal Credit since the government told people to stay at home because of the coronavirus pandemic.
Many of these will now be eligible for the Help to Save programme and the government bonus.
Once you qualify for the scheme, you have access for the full four years, so it's worth applying even if you don't have any spare cash to save at the moment.
Here's everything you need to know:
Who is eligible for "Help to Save"?
The scheme is designed for lower-paid workers, but could be used by people who've seen a drop in income thanks to coronavirus and applied for Universal Credit.
The government has previously estimated that approximately 3.5 million people are eligible, although that number is now likely to be substantially higher because of the influx of coronavirus-hit workers.
Despite this, recent government figures show that only 163,000 people have opened an account.
To qualify you usually need to be a UK resident.
But you will also be eligible you or your spouse is posted overseas as a crown servant or in the Armed Forces.
You also need to be either:
- Claiming Universal Credit and have earned £604.56 or more from paid work during the last monthly assessment period; or
- Receiving Working Tax Credit; or
- Eligible for Working Tax Credit and receiving Child Tax Credit.
Generally speaking, the benefit is aimed at workers, but if you are out of work and claim Universal Credit jointly with a partner, you may be entitled to your own savings bonus.
Even if you stop claiming benefits – you keep the scheme for the full four years, so if you've temporarily seen a hit in income, it might be a good way to boost your savings when things start to improve..
How much will I get?
How much you get depends on how much you save, but the total maximum bonus is £1,200.
This is split between two payments with a maximum bonus of £600 for the first two years and £600 for the second two.
You can put away up to £50 each month and you don't have to save at all if you can't afford to.
The rules around how the top up is calculated are different for each of the two bonus periods.
This means it can be tricky to work out exactly how much you will get.
It's made more complicated by the fact that you are allowed to dip in and out of your savings as and when you need to.
How the first top up bonus is calculated
At the end of your first two years, you get a bonus of the highest amount you've had in your savings account at any point in that period.
This might be your final savings balance at the end of the period, but it might be an earlier balance if you've made withdrawals.
For instance, if you save £50 a month for the first 22 months your balance rises to £1,100.
If you remove £100 a month for the next two months, your savings balance will drop to £900.
When your bonus is paid, you'll get 50 per cent of the higher amount which is £1,100 – so you'd receive £550 from the government.
To get the maximum bonus of £600 for the first period, you'll need to save £50 each month without withdrawing anything until the last month.
But as long as you save something you'll be entitled to some bonus.
How Help to Save affects other benefits
To qualify for Universal Credit you can't have savings of more than £6,000.
Your Help to Save account counts towards this limit, so if it tips your savings over £6,000 you could lose your benefits.
The bonuses do not affect your Universal Credit payments, and as they are paid directly into your bank account they won't affect your savings.
Working Tax Credit
Savings from Help to Save do not affect Working Tax Credit payments.
Like Universal Credit, this benefit is only available for people with less than £6,000 in savings.
Help to Save accounts count towards this limit, so you need to be careful.
The bonuses do not affect Housing Benefit payments.
How the final bonus is calculated.
After the first two years is up, you can choose to keep saving, or you can stop.
You won't lose your first bonus if you decide to stop saving.
But if you carry on, you can get a further bonus of up to £600 once another two years has passed.
The second bonus you get is calculated on the gap between your highest balance in the first two years and your highest balance in the second two years.
The government will pay you 25 per cent of the difference.
For instance – continuing the example above, your starting balance at the beginning of year three is £900.
If you manage to put away £50 per month all year, at the end of month 36 your balance is £1,500 (£600 new savings plus the £900 you started with).
In year four, you manage to save £50 a month for the first ten months, taking your savings total to £2000 in month 46.
Then in the last two months, you need to withdraw £500 taking your final savings balance to £1,500.
The highest balance in the first bonus period was £1,1oo (in month 22) and in the second period the highest point was £2,000 (in month 46).
HMRC calculates the difference between the two, which is £900 and gives you a bonus of 50 per cent of that.
Your final bonus at the end of year four is therefore £450. In year two you got £550 so overall you've had £1000 in free money.
If your balance in the second two years is never higher than you managed in the first two, you won't get a second bonus.
To get the maximum total bonus of £1,200 you'd need to save £50 every month and not make any withdrawals for all four years.
Making withdrawals early on makes it much harder to increase your highest balance figures, meaning a lower bonus in the first two years, and possibly no bonus at all in the final two.
What happens after four years?
After four years the account will be closed.
You get to keep the money you have saved as well as all your bonuses.
Unfortunately, you're only allowed one Help to Save account, so you can't open a new one.
How to apply
To get an account you'll need to apply online here.
You need a government gateway account, but you can create one when you apply.
You'll need your banking details so make sure you have those to hand.
If you can't apply online you can call 0300 322 7093 and the HMRC helpline advisers can help you open an account.
Once opened, you can manage your Help to Save account online by visiting Gov.uk or through the HM Revenue and Customs (HMRC) app which is available to download for free for iOS or Android.
You will receive an account number and sort code so you can pay money into the account.
You will also get a welcome pack from HMRC when your account is opened.
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