Saving Gateway Accounts Bill

As the noble Baroness has said, these amendments would make some or all of the claimants of pension credit eligible for the saving gateway. As I said at Second Reading, we greatly value the expertise of the noble Baroness on these issues and have very carefully considered the points that she has made. However, I have to say that we do not necessarily agree. Her main point was that it is wrong to assume that pensioners should necessarily run down their assets in retirement and that pensioners do need income and capital. It is true that people tend to build assets over their working lives and run them down once they reach pension age. This is the so-called life-cycle hypothesis of savings behaviour put forward by Modigliani and others, based on people saving in order to smooth consumption over their lifetime. That does not mean that no one wants to save in their retirement and that is not what I am trying to suggest. But who should the additional incentive of the saving gateway be targeted on? I do not deny that some pensioners would benefit from this, but many will already have developed a savings habit and have built up their assets. As I said at Second Reading, there is significant support from the Government for them to do that—for example, through tax relief on pension contributions. As the noble Baroness has said, the difference is not large but it is there. The evidence is that pensioners have higher savings ratios than average. While I am not trying to argue that no pensioners would benefit from the saving gateway, we believe that it should be focused on people of working age rather than pension age. The other reason for this is the significant support already available to pensioners. The noble Baroness spoke about pensioners who might run down their assets and was rightly concerned most about the poorest pensioners. However, more so than for the rest of the population, there is support in place for pensioners who find themselves without assets; namely, through specific measures to help them to meet particular expenditures, such as the winter fuel allowance or free prescriptions and through support, such as the basic state pension and pension credit. These measures, as the noble Baroness pointed out at Second Reading, are focused on pensioners’ income, rather than capital, but they help to tackle the symptoms of having low levels of assets and make that easier to deal with. The noble Lord, Lord Newby, asked about ISAs, which followed his observation at Second Reading when I believe he spoke about a class division; namely, that we seem to be giving huge benefits to people who already are on higher incomes or have a higher level of assets. I am very sympathetic to that. There are many benefits to savers and the middle classes, which are significant, welcome and very much a part of government policy, but they are probably underappreciated and undervalued in the hands of the recipient, and in terms of general acknowledgement and recognition of the cost to the Exchequer. The noble Lord, Lord Newby, asked whether this would be a one-off situation. As Members of the Committee will know, one of the aims of the saving gateway is to get people to save, sometimes for the first time. Therefore, it offers a very strong incentive to save. From our studies, the evidence suggests that this can happen. We have had encouraging responses from the first pilot. We believe that the saving gateway should be a one-off, acting as a catalyst rather than an ongoing incentive, which would also dramatically increase its costs if it was to be hardwired into being a benefit for all time. That approach was supported by the witnesses who gave evidence to the Public Bill Committee in the other place. In particular, Miss Sharon Collard of the Personal Finance Research Centre at the University of Bristol agreed with the idea that the saving gateway was, ""to provide an initial boost to get people into a savings habit"." She went on to say that, ""there is evidence that that can happen"." In addition, Mr Brian Pomeroy, the chair of the Financial Inclusion Taskforce, also said that it was right, ""that they get only one shot, because the basis of the scheme is that it should be a kick-start"." The noble Baroness, Lady Noakes, offered qualified support for the amendment, but went on to say—as I intended to—that it is not required because the objective that my noble friend has in mind can be achieved by regulation through the powers being taken. I greatly applaud the indefatigable energy and commitment of my noble friend in support of many groups whose case is not always advocated as well as it should be. My noble friend has worked with great energy and distinction to understand the complexities of life for many in the community who are less fortunate—in particular, carers and the elderly. I am much moved by the arguments that she advances, but I fear that I am not persuaded that it is appropriate for the Government to accept the amendment, so I beg her indulgence to withdraw it.