House of Commons, Second Reading, 13 January 2009
What is the Saving Gateway?
- A cash saving scheme for working age people on lower incomes
- Government will contribute 50p for each pound saved by the individual, paid into the account at the end of the 2 year life of the account
- Savers will be able to access the money that they have saved at any point during the life of the account
- This calculation will be based on the highest account balance that has been in the account at any point within the 2 year period. For example, if an individual had saved up to £200 but then withdrawn all or part of it they would still get the Government contribution of £100 at the end of the 2 year period
- The maximum monthly deposit from a saver into an account will be set at £25. If someone were to save consistently for the full two year period, at the maximum of £25 per month, they would build up £600 in savings and would then receive £300 from the Government, a total of £900 tax free savings
- An individual can only ever take out one Savings Gateway account
- Account holders will be able to choose what to do with the amount saved
- The intention is that accounts will be available through a range of banks, building societies and credit unions as well as the Post Office and perhaps other retail outlets.
Who will be able to save ?
Individuals will be eligible for Saving Gateway accounts if they are entitled to:
- Income Support
- Incapacity Benefit or Employment and Support Allowance
- Severe Disablement Allowance
- Jobseeker's Allowance
- Working Tax Credit or Child Tax Credit (with income below a specified level)
What is the Commission's interest?
The Commission welcomes the Saving Gateway Accounts Bill 2009. The 'Poverty Premium' affects the least well off in our communities. People who have no savings and low income are trapped in a cycle of high cost borrowing as they have no buffer when a financial emergency comes along. They have to resort to borrowing money, sometimes only small amounts, from high rate interest loan providers, sometimes from loan sharks. The people who can least afford to pay back high interest loans are the very people who have to take them out.
For instance a washing machine bought from a well known high street retailer, perhaps on interest-free credit could cost around £330. Bought from a sub-prime rental purchase shop it could cost an individual over £600.
The ability to save, even a small amount, could be a crucial step towards getting out of this financially insecure state. The Government estimates that eight million people will be eligible to benefit from 2010 onwards.
- Kick-starts a savings habit for a group of people who have not saved before, this could be their first experience of a saving product and could lead to greater financial awareness, interaction and confidence in making other financial decisions
- In the current economic climate, the Government's 50% match means that there will be no potential for fluctuating interest rates to affect the outcome
- Potential savers know that they can have access to their savings at any time, their money is not locked away should they need it
Eligibility should be extended to those over state pension age
Eligibility is via benefit and tax credit receipt. However, all relevant benefits are working age benefits, and very few people over state pension age are likely to be in receipt of Tax Credits. Individuals over state pension age will be unlikely to be eligible for the Saving Gateway.
It would seem contradictory to, on the one hand be introducing welcomed measures in the forthcoming Single Equality Bill to end age discrimination in financial services, whilst on the other be introducing a new product which effectively has an upper age limit.
The Saving Gateway should be extended to include people on Pension Credit. They, like the people on working age benefits, have a limited income, and are just as susceptible to income shocks, but are much less likely to have the opportunity of working in the future to supplement their income or build up some savings as a buffer against future financial emergencies. They could face many years of living on a limited budget, (Current Pension Credit for a single person is £124.05 per week if their income is less than this).
What better than the opportunity to put away perhaps £5 a week for 2 years, saving £320 themselves and then receiving £160 tax free from the Government. That would be £480 that they would have safely tucked away in a bank account for emergencies such as needing to buy a new washing machine. Even a £2 per week saving would mean savings after 2 years of a total of £312.
We welcome the Government's acknowledgement that potential savers will need tailored help and support to decide whether or not saving is right for them. Their commitment to engaging with a range of organisations to design and deliver this support is both sensible and helpful. It is crucial that the information available is simple and easy to understand, for some people in the target group this will be their first experience of a saving product and if successful for them could well lead to greater financial awareness and confidence in making other financial decisions.
Background: the Equality and Human Rights Commission
The Equality and Human Rights Commission (EHRC), was established on1 October 2007 and is working to eliminate discrimination, reduce inequality, protect human rights and to build good relations, ensuring that everyone has a fair chance to participate in society.
The Commission brings together the work of the three previous equality commissions, the Equal Opportunities Commission (EOC), the Commission for Racial Equality (CRE) and the Disability Rights Commission (DRC) and also takes on responsibility for the other aspects of equality: age, sexual orientation and religion or belief, as well as human rights.
The Commission is a non-departmental public body (NDPB) established under the Equality Act 2006 - accountable for its public funds, but independent of Government.
Last updated: 06 May 2016