Martin Lewis, the renowned financial expert, has recently shed light on a unique Universal Credit 'exception' that could benefit savers. During an episode of his BBC podcast, Lewis discussed a DWP scheme that offers an attractive opportunity for those on Universal Credit. One listener's question about managing a lump sum of £90,000 sparked an insightful conversation.
Lewis' principle is simple: if your mortgage rate exceeds the top after-tax savings rate, consider overpaying your mortgage instead of saving. However, he made an intriguing exception for Universal Credit recipients. Lewis mentioned, 'With the exception of a Help to Save or a regular saver where you can put a couple of hundred quid a month in.'
The Help to Save scheme is a game-changer for Universal Credit recipients. It provides a 50% bonus on deposits, effectively doubling your savings over four years. You can contribute between £1 and £50 each month, allowing you to save up to £2,400 and earn a maximum bonus of £1,200. The bonuses are paid out in two stages, with the first one arriving after two years based on the highest balance achieved during that period. The second bonus is awarded at the end of year four, calculated from the highest balance in years three and four.
Regular saver accounts offer rates over 7%, but they come with monthly deposit restrictions. For instance, Nationwide Building Society's Flex Regular Saver provides 6.5% but limits monthly contributions to £200. By depositing the maximum amount, savers can earn an annual interest of £84.50. Currently, Zopa leads the market with a Regular Saver offering 7.1%, allowing customers to save up to £300 monthly. Financial experts predict further cuts to the Bank of England's base rate this year, currently at 3.75%.
This revelation has sparked curiosity among savers, especially those on Universal Credit. The question arises: should they take advantage of the Help to Save scheme or explore other savings options? The answer lies in understanding the mortgage rate and the potential benefits of this unique Universal Credit exception.
