Credit, Collections & Insolvency News
The Financial Wellness Group is calling for ‘Help To Save’ to be extended to enable all those on a debt solution to make use of the scheme, in conjunction with the savings element that they can already include as part of their Standard Financial Statement. At present ‘Help To Save’ is only available to those on certain means-tested benefits.
Encouraging customers who are working to clear serious problem debt to save will improve their financial resilience and help them stay debt free when they complete their debt solution. Three quarters (74%) of debt solution customers who responded to a Financial Wellness Group survey said that having a savings pot would help them avoid falling into problem debt again after their debt solution.
Customers on debt solutions can already, as part of their Standard Financial Statement ‘budget’, set aside up to 10% of their disposable income (to a maximum of £20) per month as savings. At present about 1 in 10 of Financial Wellness Group’s debt solution customers take up the option.
Almost a quarter (23%) of Financial Wellness Group’s customers are managing to save at the moment – with many using savings to help them deal with the extra cost of Christmas, birthdays or small financial shocks. 38% of customers say that they’d like to start saving, but other spending priorities keep coming up and a further 39% of customers say that their current budget is too tight to allow for savings.
Enabling customers on a debt solution to access Help To Save would give them a strong incentive to put money aside and build a savings pot. On completion of their debt solution their savings would help increase their financial resilience and make it less likely that they would need to borrow.
For example, a customer that is able to save £10 a month for four years whilst on a debt solution would save £480 and might typically earn interest of less than £2.50. If they had had access to Help To Save they could earn a bonus of £240, topping their savings up to £720.
Ten million people in the UK have no savings with over half (53%) of those between 22-29 having no money saved at all (source: YouGov). Having no savings leaves people incapable of overcoming even small financial shocks – like needing to replace a fridge or a cooker, or get a problem with their car fixed. As a result, they are more likely to resort to borrowing.
By definition, people with problem debt have exhausted any savings they did have. If they aren’t able to build a savings pot whilst tackling their debt then when they complete their solution they will once again be vulnerable to any financial shocks, at a time when they may find it especially hard to access mainstream credit.
The Money and Pensions Service (MaPS) have identified that, although encouraging regular saving is key to promoting financial wellbeing, just 4% of those eligible to open a Help To Save account have done so. Financial Wellness Group has written to John Glen MP, the Economic Secretary to the Treasury, in support of MaPS’ call for the government to do more to promote take-up of these accounts; and further calling for all debt solution customers to have access to a Help To Save account.
Deborah Ware, Chief Operating Officer of Financial Wellness Group said “Creating good outcomes for people with serious problem debt isn’t just about helping them get debt free. It is also about supporting customers to learn how to budget, save and live within their means, and giving them the confidence and tools to remain debt free in future. Three quarters of customers who responded to a recent Financial Wellness Group survey said that having a savings pot would help them avoid falling into problem debt again after their debt solution.”
“Extending Help To Save to people on a debt solution would also enable debt advice providers to support the overall promotion and take up of the scheme.”