Martin Lewis Exposes Universal Credit Savings Exception for Savers
Consumer champion Martin Lewis has issued a crucial alert regarding a Department for Work and Pensions scheme that savers, particularly those on Universal Credit, should urgently consider. During a detailed episode of his BBC podcast, Lewis shared extensive advice on building savings effectively, devoting significant time to the debate between mortgage overpayments and depositing funds into savings accounts.
Mortgage Overpayments Versus Savings Strategy
One listener posed a specific question about handling a lump sum of £90,000 they were due to receive, while paying a mortgage rate of 5.6 percent. Lewis outlined his general principle: if your mortgage rate surpasses the top after-tax savings rate available, overpaying your mortgage might be the smarter financial move. He initially noted that "you cannot earn 5.6 percent in savings," but quickly highlighted exceptions where this rate can be exceeded.
Help to Save Scheme for Universal Credit Recipients
Lewis emphasised the Help to Save scheme as a standout option for those receiving Universal Credit. This government-backed initiative offers a substantial 50 percent bonus on deposits, providing 50p for every £1 saved over a four-year period. Participants can contribute between £1 and £50 monthly, allowing total savings of up to £2,400 over four years and potential bonuses of £1,200.
The bonuses are distributed in two stages: the first payout arrives after two years, based on the highest balance achieved in that period, and the second at the end of year four, calculated on the highest balance in years three and four. This structure incentivises consistent saving and can significantly boost financial resilience for eligible individuals.
High-Interest Regular Saver Accounts
Beyond the Help to Save scheme, Lewis mentioned regular saver accounts as another avenue to beat mortgage rates, with some offering over 7 percent interest. For example, Nationwide Building Society's Flex Regular Saver provides 6.5 percent but limits monthly deposits to £200, potentially yielding £84.50 annually in interest at maximum contributions.
Currently, Zopa leads the market with its Regular Saver at 7.1 percent, permitting up to £300 in monthly deposits. These accounts, while restrictive in deposit amounts, offer competitive returns that can outpace many mortgage rates, making them a viable alternative for savers with disposable income.
Economic Context and Future Outlook
Financial experts are anticipating further reductions in the Bank of England's base rate, which currently stands at 3.75 percent after being held steady in the latest announcement. This economic backdrop underscores the importance of strategic financial planning, as Lewis's advice aims to help consumers navigate uncertain times by maximising returns through informed choices between debt reduction and savings growth.
