Norfolk organisations give cautious welcome to government savings scheme for low earners
PUBLISHED: 06:00 13 September 2018 | UPDATED: 07:15 13 September 2018
ARCHANT EASTERN DAILY PRESS (01603) 772434
A government scheme designed to help those on the lowest incomes build up a savings pot has met a mixed response from consumer finance organisations in Norfolk.
A government scheme designed to help those on the lowest incomes build up a savings pot has met a mixed response from consumer finance experts in Norfolk.
Holders of a Help to Save account, available to working people claiming tax credits or universal credit, would be able to save between £1 and £50 a month for up to four years.
Under the initiative, the government would give savers an extra 50p for every £1 they save.
It has been designed to help those on the lowest incomes start a ‘rainy day’ fund to cope with household emergencies or save for family treats such as holidays.
Mike Lamb, of Kings Money Advice in Norwich, supports the scheme’s intentions but feels it may not be as effective as hoped.
A government pilot of the scheme saw 45,000 people save some £3m over eight months – but Mr Lamb pointed out this only equates to £66 each, a fraction of the £400 account holders could potentially save in that time.
“At that rate in a year you could save about £100. This is ok but if you were to put that into a credit union then they would allow you to borrow a multiple of what you save,” he said.
“If you are saving for a rainy day and the fridge breaks down you are going to want a large sum of money immediately and if you have only managed to save £50 that is not going to be enough.”
He added: “Saving is obviously a good habit to get into but at the end of the day we are taking about very low sums of money.
“An awful lot of people I deal with, if they have creditors to pay, £1 a month is as much as they can afford [to save]. And adding 50% on to a small amount of money is still a small amount of money.”
Alan Camino, a board member at Norwich Credit Union, agreed that anything which encouraged people to save should be welcomed – but he said the scheme should be “well advertised” and accompanied by basic financial education.
“I know people who are permanently overdrawn,” he said. “If you don’t have anything to live on it is very difficult to find a way to save.”
He added that an incentive from government when opening an account, as well as the 50% pay-out when it closes, may encourage more people to sign up.
The scheme’s launch comes as new figures from insolvency trade body R3 show that one in six (16%) adults in the East of England has had an outstanding credit card balance for at least six months.
If you value what this story gives you, please consider supporting the Eastern Daily Press. Click the link in the orange box above for details.