PM announces savings reward for thrifty low earners

14 Mar 16

Prime minister David Cameron has announced a help-to-save scheme that could see the government top up 3.5 million low-income people’s savings by £1,200.

Cameron said he was on a “mission” to improve life chances across the country and also announced an increase in the national minimum wage for people under 24 and the creation of a £14m national mentoring campaign for struggling teens, ahead of chancellor George Osborne’s Budget on Wednesday.

According to the prime minister, the measures will give hard-working people the extra support they need to fulfil their potential.

Under the scheme, 3.5 million people will be eligible for a government-backed bonus on their savings. Research has shown that almost half of UK adults have less than £500 set aside for emergencies.

Anyone in work and in receipt of Universal Credit or working tax credits who saves up to £50 a month will be eligible to receive a 50% bonus after two years, worth up to £600.

Account holders who then chose to continue saving under the scheme for a further two years will then be eligible to receive another bonus worth up to £600.

Number 10 said this will see the individuals earn a savings pot worth up to £3,600 after the full four years, with £1,200 coming from the government.

Osborne also highlighted Cameron’s plans to increase the national minimum wage for young people, which he dubbed “the next step for the next generation as we move to a higher wage society”.

The government said that almost half a million young people will benefit from the changes, with 21- to 24-year-olds seeing a pay rise worth an average of £450 per year.

Their rate will rise by 3.7%, to £6.95 an hour, while 18- to 20-year-olds will see an increase of 4.7% to £5.55 an hour.

The minimum wage for 16- to 17-year-olds will also rise by 3.4%, to £4 an hour, and apprentices will see a rise of 3% to £3.40 an hour.

Number 10 said the changes, which take effect in October this year, will see the minimum wage for 21- to 24-year-olds restored to its highest level in real terms, higher than its previous peak before the financial crisis.

A £14m national mentoring scheme that aims to provide guidance to struggling teens will also be established, as part of Cameron’s commitment to provide £12m over the course of this parliament to build capacity in the system.

Once established, the fund, which will be managed by The Careers & Enterprise Company, will see 25,000 young people who are at risk of under achieving or dropping out of education receive extra support from “high-flying professionals” every year.

The money will be used to scale up proven mentoring programmes and prioritise young people stuck in “cold spots” across the country, without access to mentors.

Education secretary Nicky Morgan said the funding will make “a real difference” to young peoples’ lives.

Mike Hughes, executive director of charity TwentyTwenty, which supports disadvantaged, disengaged or hard-to-reach young people, also “wholeheartedly” welcomed this “innovative and important campaign to give this vital opportunity to thousands more young people who desperately need it”.

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