GOVERNMENT incentives to help people save need a shake-up so families can build resilience against financial shocks, a leading think tank urged today.

The Resolution Foundation warned that low to middle-income households struggle to build up cash reserves, with adults in the bottom half of income distribution typically having just £3,000 in savings each. 

Savings allowances and Isas are progressive, its report said, with basic-rate taxpayers able to earn up to £1,000 in savings interest untaxed, compared with £500 for their higher-rate peers.

But most support is skewed towards wealthier savers, stressed the organisation. For working-age adults, about £3 in every £10 saved in Isas is held by people in the top 10 per cent of incomes.

The “help to save” scheme, where people are able to save up to £50 a month and receive a top-up from government, is instead targeted at low-income families receiving benefits. 

However, take-up of the scheme is low, with fewer than one in 10 eligible participants using it, the think tank highlighted. 

The foundation’s economist Molly Broome said: “Britain’s lack of financial resilience has left many exposed during the cost-of-living crisis, with families having to build up debts and fall behind on bills.

“Government incentives to save do exist but are not fit for purpose.”

She urged Tory Chancellor Jeremy Hunt to focus on encouraging more people to save rather than rewarding those who “already have very significant savings.” 

For example, “help to save” should be expanded by auto-enrolling benefit claimants, doubling the monthly cap to £100 and excluding the scheme from universal credit rules that slash benefit entitlement for those with savings, Ms Broome suggested.

A Treasury spokesperson claimed that ministers “offer targeted support to help those on the lowest incomes save.”