Saving Gateway Accounts Bill

We have chewed this over in Committee and again today. My concern is to ensure that the default option is a good one for saving gateway account holders. Where there is inertia, as there will be for many people, who will not necessarily make the rational choice that we might want them to make, we want them to default into an account that pays them a good rate of interest. I was keen to move down a more prescriptive route to ensure that there is a good deal for those who effectively make no choice when the account matures. We have to be careful about assuming that people always act in a rational fashion, because that is not always the case. I am an accountant by background, and I am not sure that my financial decisions are always rational. People will not always do a whole of market review to see what the options are and decide that National Savings and Investments is the right approach for them. I am keen to ensure that the default option is a good choice and that people will not do themselves any harm by defaulting into something that offers a rate that is not comparable to an ISA. Even people who are not paying tax are probably better off in an ISA than in a normal savings account. My approach is to say that we should encourage them to take up a good option that should not cause them too much harm. That would not preclude them from exercising choice, in the same way that in personal accounts there is an auto-enrolment process whereby once someone is enrolled they can decide to opt out. The default option is meant to be a positive one on which they can make a choice. This is the same approach. I would not say that someone has to be in an ISA for two years, 18 months, six months or even a week, but once they have gone into it they can then choose, if they wish, where the best home for their savings is. There would be another benefit from having a vehicle like an ISA as the default option. This goes back to some of the work that Thaler and Sunstein and others have done on behavioural economics; it is about the concept of mental accounting. If someone has some money locked away or put in a separate account, they have to make a conscious decision to access that money. Sometimes people on low incomes adopt a ““jam jar””, mental accounting approach to saving. That is why Farepak was attractive. It may not necessarily have been something that most people would accept as a reasonable way of saving for Christmas, but it worked because it was a form of mental accounting in that the money was locked away until it was needed. That is one of the attractions behind defaulting into an ISA. It would be a powerful way of getting people to think about setting their money aside, and it is an account that would do people the least harm to default into, compared with a savings account paying 0.1 per cent. interest, as in many cases at the moment. It would represent a good deal for people who have a saving gateway account that has reached the end of its life. I do not think that the Minister and I have a huge disagreement; it is a matter of how this is put into practice. He clearly signalled to account providers the sort of options that should be offered to people when their account matures. I hope that the Government will think not only of the choices that they offer to people in the financial education that they put alongside that, but how they ensure that for people who do not make a conscious choice the option that the account rolls into will represent a good deal for savers rather than a less satisfactory deal. That is the driver behind the amendment. We are not far away from the outcome that we want, but there is perhaps a difference of approach in how to get there. However, I am assured that providers will take from this debate the message that there is a commitment on both sides of the House to ensure that people have choice when their account matures, but that where choice is not exercised the default option is a good one. I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn. Third Reading