Saving Gateway Accounts Regulations 2009

My Lords, it is a pleasure to open today’s debate on the Saving Gateway Accounts Regulations. These regulations follow from the Saving Gateway Accounts Act, which received Royal Assent in July. Alongside that Act and the Saving Gateway Accounts (No. 2) Regulations, which cover tax relief and so are being debated only in the other place, these regulations will set out the legislative framework for a national saving gateway scheme. As noble Lords will know, the saving gateway will give around 8 million working people on lower incomes the chance to earn 50p from the Government for each pound that they save. It aims to kick-start a savings habit and to bring people into contact with mainstream financial services, some of them for the first time. I am pleased to say that those aims have had widespread support from all sides of this House, in the other place and beyond. I hope that noble Lords will also support these regulations, which will make the saving gateway a reality. The regulations cover three main areas, which I will briefly outline. First, they provide further details on eligibility for the saving gateway. The saving gateway account sets out that eligibility will be passported from entitlement to certain benefits and tax credits. This is the simplest and most efficient method available for determining saving gateway eligibility. These passporting benefits and tax credits include both working tax credit and child tax credit. However, as these tax credits can be received at a range of different incomes, we have been clear that only claimants with incomes below a certain level should be eligible for the saving gateway. These regulations will align that level with the income threshold for child tax credit, which is currently £16,040. Also in relation to eligibility, the regulations set out the connection with the UK that people would need to have in order to be eligible for the saving gateway. This is that the person must be ordinarily resident in the UK, which broadly means that they must either live or work here. The second major area that the regulations cover is the features of saving gateway accounts. Many of these will be familiar to noble Lords and are now as they were announced in December last year. They were contained in the draft regulations published in February and were discussed during the passage of the Bill earlier this year. Let me pick out the most significant of these features. Regulation 7 sets the maturity period—how long each saving gateway account will last—at 24 months. Regulation 11 sets out the monthly deposit limit for saving gateway accounts at £25. Regulation 9 sets the amount that the Government will contribute to each pound saved—the match rate, as it is sometimes called—at 50p. As noble Lords may know, we experimented with different match rates during the second pilot of the saving gateway and we believe that a rate of 50p for each pound provides better value for money than a higher match rate, while still providing a strong incentive to save. Together, these features of the saving gateway mean that account holders will be able to save up to £600 in their accounts and earn up to £300 from the Government. Thirdly, the regulations set out the detailed requirements that will be placed on account providers. The noble Lord, Lord Newby, spoke on a number of occasions during the passage of the Bill about the importance of there being a range of providers. I have been working hard to ensure that this is the case and I am confident that there will be sufficient providers to support a national saving gateway scheme and to provide eligible people with a choice of where to open accounts. I am encouraging major retail banks and potential providers to recognise the importance of being involved with the saving gateway, which will benefit the wider community, particularly at this current time. As I said, the regulations set out the requirements that will be placed on saving gateway accounts. The noble Lord, Lord Newby, stressed during the passage of the Bill the importance of these requirements being kept to a minimum and being as simple as possible. That is very much the approach that we have followed. We have, in fact, made a number of changes to our original proposals for the saving gateway in order to achieve that. For example, the regulations do not include any requirement for providers to pay interest to account holders and they require providers to issue statements only six-monthly, rather than quarterly as originally proposed. During the passage of the Bill through this House, we also decided that account providers would not be required to offer account holders the opportunity to transfer their accounts between providers other than in a limited range of circumstances. That was a point raised by the noble Baroness, Lady Noakes, and it is the position taken in these regulations. The regulations also set out the detail of the returns that providers will make to HMRC. We have been careful to minimise the amount of information that will be required. In conclusion, these regulations will form a vital part of the legislative framework for the national saving gateway scheme to be introduced next year; we will announce an exact start date for the saving gateway in due course. They reflect the lessons learnt from the two pilots of the saving gateway, the responses to the detailed consultation that we carried out in 2008 and the comments that we have received since they were first published in draft in February. We are very grateful for the input from many different groups, including many noble Lords during the passage of the Bill earlier this year. For example, the noble Baroness, Lady Noakes, argued in Grand Committee that the regulations should prevent account holders from selling their accounts or borrowing against them; Regulation 10(1)(g) now provides that the account must be in the "beneficial ownership" of the account holder. I believe that the engagement and consultation that we have had over a number of years have contributed to the design of a scheme that will offer a real incentive to save, in the financial mainstream, to working-age people on lower incomes—a group with lower savings and higher levels of financial exclusion than the remainder of the population. This is a targeted initiative that could make a real difference to the lives of around 8 million people in this country and I am pleased that it has had such widespread support in this House. I hope that that will continue today.