He shared several tips about how to build up your savings
Martin Lewis has spoken about a DWP scheme that savers may want to consider. The consumer champion shared numerous tips on building up your savings during an episode of his BBC podcast.
He devoted much of the programme to discussing mortgage overpayments and whether this approach is preferable to depositing money into savings accounts. One listener enquired about what to do with a lump sum of £90,000 that they would soon receive. They were paying a relatively steep mortgage rate of 5.6 per cent and sought guidance on how to use the funds.
Mr Lewis’ general principle is that if your mortgage rate exceeds the top after-tax savings rate available, it may be wiser to overpay your mortgage rather than deposit cash into savings. Addressing the question, Mr Lewis initially said that “you cannot earn 5.6 percent in savings”.
However, he highlighted certain savings vehicles where this rate can be beaten. He mentioned 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 a look if you’re receiving Universal Credit, as it provides a 50 per cent bonus on deposits. Through the scheme, you receive a 50p bonus for every £1 you deposit into the account over a four-year period.
You can contribute between £1 and £50 each month, meaning you can save up to £2,400 over four years, earning up to £1,200 in bonuses. Savers receive their bonuses across two stages, with the first payout arriving after the initial two years, calculated on the highest balance achieved during that period.
The second bonus comes at the conclusion of year four, determined by the highest balance reached in years three and four. When it comes to regular saver accounts, you can get rates of over 7 percent, but there are restrictions on monthly deposits.
Take Nationwide Building Society’s Flex Regular Saver, for instance, which offers 6.5 percent but caps monthly contributions at £200. By depositing the maximum amount, savers could pocket £84.50 annually in interest.
Currently, Zopa leads the market with its Regular Saver offering 7.1 percent, allowing customers to stash away up to £300 monthly. Financial experts are forecasting further cuts to the Bank of England’s base rate this year.
The rate presently stands at 3.75 per cent. The central bank opted to maintain this level in its most recent announcement.
