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StepChange response to HM Treasury consultation on reform of Help to Save

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HM Treasury consulted on the future of the Help to Save scheme, which provides matched payment savings support to people in work and eligible for Universal Credit.

Savings are central to building financial resilience that helps protect people against problem debt arising from disruptive life events. StepChange research has shown the likelihood of falling into problem debt is 44% lower if a family has £1,000 saved. However, the level of savings among UK households is too low and, in part as a result, many households have low financial resilience.

The Help to Save scheme has been broadly successful for those who are able to access it. However, take-up among the eligible group appears to have stalled and evaluation evidence suggests that the design of the scheme means that it is not accessible for the majority of the eligible group.

With these factors in mind, we believe the government should work to make the scheme more accessible, including:

  • Extending eligibility criteria to ensure support reaches more low- to middle- income households with low financial resilience by:
    • Introducing personal and household income criteria (alongside the present means-tested benefit criteria), building on the Savings Gateway model; and
    • Removing the in-work requirement, which is currently tenuous (because eligibility based on work status is assessed at only one point) and excludes many of the households whose financial resilience is most likely to be improved by the scheme. We also note the single take-home pay requirement in UC appears to disadvantage single people and single parents (because the requirement is the same flat-rate amount for couples and single people, so single people must earn proportionately more.)
  • Increasing the monthly savings limit, at minimum to respond to inflation, and increasing payment flexibilities to make it easier for eligible people to participate and get the maximum benefit from the scheme.
  • Increasing incentives to participate in the scheme by reducing the frequency of the bonus assessment period and resetting the assessed balance at the end of each period.

We also advocate for allowing eligible people to access the scheme more than once and ultimately move to a permanent structure in which users continue to be eligible for bonus payments so long as they meet scheme eligibility criteria. While increasing long-term costs to government, a relatively small proportion of the £7 billion the government spends annually supporting household savings is directed to low- to middle-income households and this approach would re-balance spending and boost the financial resilience of these households.

More generally, the government should use promising early results from Nest Insight’s pilot of an opt-out workplace savings scheme to consider how it can support payroll savings schemes that could, for eligible people, be linked to Help to Save accounts.

Finally, we encourage HM Treasury to work, as part of the government’s financial inclusion agenda, with the Department for Work and Pensions to continue to build and update the evidence base on the budgeting and savings needs of households with low- to middle-incomes and use this insight to develop the government’s savings offer for that group.