Piggy bank raid: Nearly £2m of withdrawals made by hard-up savers holding Help to Save accounts in just three months
- Help to Save is a government scheme which pays out a bonus to eligible savers
- It is designed to encourage new savers to build up a fund over a four-year period
- Nearly £2m was withdrawn between March and June as those on lower incomes needed to tap the deposits to get by
Hard-up savers withdrew almost £2million in three months from a tax-free government savings scheme aimed at helping those on low incomes build a rainy-day fund, official figures show.
Some 12,260 requests to withdraw money from Help to Save accounts, which pay a 50 per cent top-up of up to £1,200 over a period of four years, were made between the start of March and 5 June, with savers withdrawing an average of £155 each.
The figures came from a Freedom of Information request made to HMRC by the insurer Royal London.
Millions of pounds has been withdrawn from the government-backed Help to Save accounts since March, official figures from HMRC revealed
There were 175,000 accounts opened by the end of March with a total of £55million deposited.
It would indicate that around 7 per cent of all savers in the scheme may have tapped into the money to get by.
‘The stats aren’t a surprise although, if you’d asked me to guess, I’d have gone for a figure higher than 7 per cent of accounts being accessed’, James Blower, industry expert and founder of The Savings Guru, said.
He adds: ‘The bad thing is that I expect that it’s probably more like 5 per cent of accounts accessed with most simply taking it all out to cope with the situation.
‘I suspect that, if we did a similar request in three months’ time, the stats will be worse.’
The withdrawal figures are a blow given the scheme is designed to incentivise people to build up substantial savings by paying out a government bonus after two and then four years, but also demonstrate the impact the coronavirus crisis has had on the lives of those on lower incomes.
While Britain as a whole has been saving record sums over the last few months, close to 30 per cent of those £20,000 or less have seen their income reduced, according to the Office for National Statistics.
At the same time only around a third of those people believed they would be able to save money over the next year, the ONS found in June.
Those on lower incomes are likelier to have seen their income reduced due to the coronavirus and are less likely to be able to save over the next 12 months
And research from the think tank the Resolution Foundation found 32 per cent of the second poorest fifth of households were saving less than usual during the crisis and a quarter had turned to borrowing to get by.
While the think tank’s George Bangham said Britain’s ‘wealth divides have been exposed by the crisis’, the lack of a safety net among those on lower incomes long predates the coronavirus.
Research from the Resolution Foundation found those on lower incomes were saving less during lockdown, while richer households saving more has contributed to record deposits
Launched in September 2018, Help to Save was one attempting at solving the endemic problem.
It is open to those on Working Tax Credit or Universal Credit, provided they earned £604.56 from paid work in the month since they made a claim, and allows savers to put away up to £50 a month into a government account.
After two years the government pays out a 50 per cent bonus on the maximum amount saved over the period, up to £600.
And after two more years, provided savers continue to add to their balance, they will receive another bonus of up to £600.
These rules mean those who withdrew money because they needed it in the short-term will see their bonus fall, as savers will not be able to put away more than £50 in the future to compensate for withdrawing money now.
Royal London’s Rebecca O’Connor said: ‘The proportion and size of withdrawals from Help to Save accounts indicates the extent that some low income earners have had to call on all available resources to get through the last few months.
‘Those who had managed to scrape together deposits in these accounts are no doubt disappointed they’ve had to raid them to get by during lockdown, as this money was probably earmarked for something else’.
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