Investment

A little-known Government scheme returning 25% per annum

Help To Save is a Government scheme designed for people meeting certain conditions to tuck money away and receive a great return. I’m not entirely sure why it’s not very well-publicised as it’s a phenomenal saving and investment mechanism (perhaps that’s exactly why it’s not very well publicised!).

You can save a maximum of £50 a month for 4 years. After 4 years, your Help To Save account automatically closes. There is nothing to stop you and your partner both opening an account provided you’re both eligible in the first place.

After years 1 and 2, they take your highest saved amount and pay you a 50% bonus. So let’s say you diligently set up a direct debit of £50 a month (i.e. the maximum amount for the maximum length of time), you’ll have saved £1200 in your Help To Save account and you’d get a 50% bonus, i.e. £600. That’s an annualised return of 25%!

To put that into context, a decent property investment will usually yield 5-8% and a good year in the stock market will usually bring around 10% or slightly more. A 25% return is quite superb, especially when you factor in the extremely low risk. The downside here is that you can’t save more than £50 a month. Although, if both husband and wife opened an account, you could save £100 a month.

In years 3 and 4, they take the difference between the highest balance you have in years 3 and 4 and the highest balance you had in years 1 and 2, and pay you a 50% bonus on that. If you replicate what you did in years 1&2 (and keep that money in the account), you should have saved £2400 by the end of year 4. You will therefore get a bonus of £1200.

Securing a 25% annual return for 4 years is the stuff of dreams (well certainly mine anyway).

Eligibility

The eligibility criteria are as follows, but I’ve read online about people simply checking their online government gateway portal (If you don’t have one, I recommend you sign up for one here – it lets you do all sorts of things like check your National Insurance contributions, your forecast state pension etc) and checking if they’re eligible:

  • receiving Working Tax Credit;
  • entitled to Working Tax Credit and receiving Child Tax Credit; or
  • claiming Universal Credit and your household earned £542.88 or more from paid work in your last monthly assessment period.

It’s definitely worth visiting this link and letting the system check if you’re eligible. If you are, you can sign up online straight away.

Is this halal?

Yes as the government bonus is understood as a gift paid for by the government when viewed through the fiqhi lens. The government does not peg this return in any way to interest rates. This is a straightforward scheme which pays a bonus based on the amount you save. This has been designed for policy, rather than commercial, reasons.

How can I best use this?

This is a great savings tool if you’re building cash up for a long-term project. This would otherwise be dead money in your account, or at best, would be invested in something that would likely return much less than 25% if you are being relatively cautious in your investment (and if you’re saving for something long-term, you would be cautious as you wouldn’t want to lose your money).

Alternatively, it’s a great way of saving for kids and you can effectively add it to the pieces I wrote here and here. If you could, as a couple, save £50/month for 4 years in each of your accounts, you’ll have saved £7200 (having only put cash in of £4800. That’s very respectable indeed. If only there were a way of replicating that for 10-15 years!

Conclusion

Let us know how you get on in the comments below. If you’ve got any other top saving tips, let us know too!

11 Comments
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  • Salaam. Do you think the governments help to buy ISA would also be halal? I think they offer 20% return specifically for those saving towards. house.

    Reply
    • Yes – same analysis – it is a gift from a fiqhi perspective so perfectly fine.

      Reply
      • Jzk for your response. But I guess we still need to find a ‘shariah compliant’/’ethical’ H2B ISA when looking into this? (If they exist)

        Reply
        • Mohsin Patel
          March 25, 2019 3:51 pm

          Interesting question – you triggered a research process that potentially brings the whole thing into question in terms of whether H2B is halal. Not because of the Govt bonus (which is fine, as Ibrahim mentioned), but because it seems from my cursory look online that you can only open a H2B account with providers who are going to pay interest.

          Have you found any providers that pay zero interest on the cash that sits in the H2B account? My understanding also is that you can’t choose to invest the money (into something halal), it has to sit as cash.

          Reply
          • And this article triggered another look into H2B for me 🙂 which led me down a rabbit hole into a world of ISA technicalities I don’t quite understand. There’s also a lifetime ISA offered by the government which may be better than a H2B ISA in some circumstances but the ISA provider options seem limited, more in the latter than the former, I’m still looking into it.

            Maybe an analysis on the the permissibility of these government schemes could be covered in a future article 🙂

          • salaam. I know it’s been quite a while since my last comment so really just putting this out there in the hope you might catch it.

            So with looking into this further after a friend of mine brought it up (as the scheme closes soon)… it looks like the H2B ISA is a cash ISA and there are no providers offering an interest free option. Can one simply open the account with any provider and upon closing it (when purchasing a house), take the government bonus and leave the interest? Or would that be wrong from a shar’3i perspective?

  • As salaam u alaikum.

    Not halal according to: http://alqalam.org.uk/wp-content/uploads/2018/05/Help-to-Save-Scheme.pdf

    Whats your take on their opinion?

    Reply
    • Mohsin Patel
      May 21, 2019 3:44 pm

      Ws Rashid,

      JazakAllah khair for taking the time out and flagging this.

      Our in-house position is that we respectfully take a different view for a few main reasons:

      1) The fact that the scheme is administered by NS&I is neither here nor there from a purely administrative perspective. They’re making NS&I administer the scheme because that’s practically the only real way they can do this. The alternative would be something completely unworkable like having to send in your own bank statements to show how much you’d been depositing and then have HMRC work out the bonus. So from an admin angle, it’s clear to see why they’re doing it via NS&I.

      2) This does not mirror a normal riba transaction where banks give incentives for you to loan them money. If we took that to be true for a moment, why would the Government give such a relatively enormously high return for your £50/month? It has the ability to borrow money for much, much cheaper and at much higher scale. The answer to this is, in our view, is that this is because it isn’t a normal riba transaction – it’s a genuine gift from the government to promote lower-income households to save. The government do have schemes via NS&I to raise money – like Premium Bonds (which are haram). You’ll notice that the returns on these are significantly lower because those are genuine “loan-type” commercial transactions where they want to borrow your money. That is not the case with the Help to Save.

      3) The fact that NS&I might then be using your money to do haram things is a moot point. If we use that as the yardstick, then we couldn’t give money to lots of people or organisations. The counter-argument of “but you’re receiving something back” is addressed in 2) above.

      I hope that makes sense. Allah knows best.

      Reply
  • Abu-bakr Muhammad Saeed
    September 9, 2019 3:43 pm

    Salaam have you found a provider that doesn’t give interest on the savings?

    Reply

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