Martin Lewis has highlighted a DWP scheme that savers may want to look at. The consumer expert shared a host of tips around building up your savings on an edition of his BBC podcast.
He spent much of the show talking about overpaying mortgages and if you are better off doing this rather than putting cash in your savings. One question came in from a person who was set to receive a lump sum of £90,000 soon.
They were on a relatively high mortgage rate of 5.6 percent and wanted to know what to do with the cash. Mr Lewis’ general rule is that if your mortgage rate is higher than the top after-tax savings rate you can get, it may be better to overpay your mortgage rather than put cash in your savings.
Responding to the question, Mr Lewis said on his BBC podcast initially that « you cannot earn 5.6 percent in savings ». However, he pointed to some savings vehicles where you can beat this rate. He said in passing: « With the exception of a Help to Save if you’re on Universal Credit or a regular saver where you can put a couple of hundred quid a month in. »
The Help to Save scheme is worth looking at if you are on Universal Credit, as it offers a 50 percent bonus on what you pay in. Through the scheme, you get a 50p bonus for every £1 you deposit into the account over a four-year period.
You can pay in between £1 and £50 each month, meaning you can stash away up to £2,400 over four years, earning you up to £1,200 in bonuses.
You get the bonuses in two rounds, with one paid out at the end of the first two years, based on your highest balance saved in those two years. You get your other bonus at the end of the fourth year, based on the highest balance saved in years three and four.
In terms of regular saver accounts, you can get rates of more than 7 percent, but you are limited as to how much you can put in each month. For example, Nationwide Building Society will pay you 6.5 percent with its Flex Regular Saver, but you can only pay in up to £200 each month.
If you pay in the maximum, you could earn £84.50 a year in interest. The current top rate is with Zopa, as you can get 7.1 percent with its Regular Saver paying 7.1 percent. You can put away up to £300 a month in this account.
Experts are predicting the Bank of England will continue to drop the base rate this year, which currently sits at 3.75 percent. The central bank decided to keep the rate at this level in its latest decision.
