Pensions - Articles - Comment from Aegon on Governments Help to Save campaign

 “The government’s new ‘Help to Save’ scheme will help lower-paid people on in-work benefits save for a rainy day, making them more financially resilient. Providing they save £50 a month, and don’t take any money out, they will be able to build up the maximum savings of £3,600 over four years including the £1,200 government bonus. The 10 month roll-out means that not all the low-paid will be able to access the scheme from day one.

 “The government has announced a number of policies aimed at the lower paid in recent years, including the Living Wage, the rapid increase in basic rate income tax threshold, increasing take-home pay and their flagship automatic enrolment policy helping to kick-start pension savings.

 “One to watch is whether ‘Help to Save’ will disrupt automatic enrolment causing workers to opt-out of pension saving in return for the more flexible, but short-term savings. People’s incomes are under pressure and they have a finite amount of cash they can afford to save. They will need to balance their long-term plans against more short-term considerations. Saving in an employer’s pension scheme will still be the best deal around, as employees not only benefit from a government top-up on their own contributions, but also the employer’s contribution, every time they pay in. So currently every £50 an individual saves under automatic enrolment immediately becomes £112.50. This is set to increase as contributions rise from April 2018. The employer’s pension contribution is far more valuable than any government bonus allowing workers to build up savings at a faster pace than the new ‘Help to Save’ scheme.”