Savings (Government Contributions) Bill (Fourth sitting)

Eilidh Whiteford Excerpts

Thursday 27th October 2016 Public Bill Committees

Division 2

Ayes: 2

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Scottish National Party: 2

Noes: 7

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Conservative: 7

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I beg to move amendment 8, in schedule 2, page 19, line 11, at end insert—

“(e) make provision for eligible persons to be auto-enrolled into Help-to-Save accounts from benefit entitlements unless the individual chooses to opt-out.”

This amendment would enable an “auto-enrolment” workplace saving scheme which would see an individual automatically signed up to a Help-to-Save account. He or she then must “opt-out” to stop money being deducted from their pay or benefits into a savings account.

The amendment would enable the establishment of an auto-enrolment type of workplace saving scheme that would allow individuals to be automatically signed up for a Help to Save account. Individuals could of course opt out of this entirely, but for many it could help overcome the inertia and procrastination sometimes associated with getting started in setting up a savings account. These days, there are fewer and fewer high street outlets, banks and building societies—indeed, several are closing in my constituency tomorrow—and that is going to make it even harder for people to talk to somebody face to face about savings products. I believe that if an incentivised savings scheme is made easily accessible and available the likelihood of participation is greatly increased. More people who would be well advised to save but who do not do it would find it an awful lot easier to get started.

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[Jane Ellison]

The amendment is about auto-enrolling individuals into Help to Save accounts. I understand the motivation, and given the evidence from StepChange the Government do not doubt the sincerity of the intention and the desire to help people to save. However, we have concerns, and I shall explain why we cannot support the amendment.

The amendment would provide for arrangements allowing employers or benefit paying bodies to divert money from employees’ pay or benefits into a Help to Save account, unless they chose to opt out. To return to an earlier debate about auto-enrolment, we all believe that it has been a huge success in pension saving. However, while there is a strong case for auto-enrolling people into long-term pension savings, we do not think that is the case for the rainy-day savings that Help to Save is designed to support.

We want a decision to save into an account to be an active choice made by eligible individuals at a time that is right for them. Given the focus on rainy-day savings, we think that many will want to use the account flexibly, putting aside what they can afford each month rather than committing to a fixed amount being deducted from their salary or tax credit payments. For those looking to make regular payments into a Help to Save account, a standing order that they control will be the best option. That is because many people who are eligible for Help to Save could well have more than one job or other changes in circumstances over the four-year period when they have an account. The target group for a Help to Save account is disproportionately more likely to have a series of different jobs or more than one job at the same time.

Nevertheless, an employer that wants to offer payroll deduction into a Help to Save account to its employees is perfectly free to do so—nothing in the legislation would stop them. The Government are aware of successful voluntary workplace savings schemes and we are keen to explore the role that employers and other local organisations can play to support people in getting access to Help to Save, but we have no intention of making that a statutory requirement at a time when we are still working with businesses to roll out and embed automatic enrolment into workplace pensions—particularly given the forthcoming rises in contribution rates. We think that that must remain the priority for employers. That takes us back to an earlier debate about the support we all give to auto-enrolment, and the desire not to confuse that picture.

I hope that, with those points in mind, the hon. Lady will withdraw her amendment.

[Dr Whiteford]

I take on board the Minister’s concern, particularly for people who may be in multiple employment; that is a fair point. I am not sure that the arrangement would not be hugely beneficial for employers too, or that they would be all that resistant. The amendment is intended as an enabling provision, but in the interest of making progress, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Ian Blackford]

I beg to move amendment 7, in schedule 2, page 19, line 31, at end insert—

‘(2A) Where a bankruptcy order is made against a person with a Help-to-Save account any bonus paid into the Help-to-Save account will not form part of a debtors estate during insolvency proceedings.

(2B) Any bonus paid into a Help-to-Save account shall not be liable to be taken as repayment via third party debt orders.’

The amendment would ensure that those subject to a bankruptcy order would not be stripped of their assets. Currently, Help to Save affords no protection to the Government bonus paid into accounts from insolvency proceedings or third-party debt orders from creditors. The Government need to look closely at the debt collection and insolvency implications of the scheme. Given the target audience of Help to Save, it is likely that many will face financial difficulties while holding a Help to Save account. That would leave them vulnerable to third-party debt orders and potential insolvency.

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Division 3

Ayes: 2

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Scottish National Party: 2

Noes: 8

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Conservative: 8

[Dr Whiteford]

I beg to move amendment 1, in schedule 2, page 20, line 21, at end insert

“which must be paid no later than six calendar months beginning with the calendar month in which the account is opened”.

This amendment would reduce the time before the holder of a Help to Save account would receive a government bonus to six months.

I will be extremely brief. This amendment is very simple: it would reduce the amount of time before a Help to Save account holder receives their Government bonus to six months, which simply reflects the reality of the timeframe in which people on lower incomes are likely to have to dip into their savings to cover unexpected costs. Again, the amendment builds on research by StepChange, whose users are the target group for the product. According to StepChange, more than three quarters of people in the target income band will need to dip into savings more than once in a year, and a significant proportion will need to do so within six months. Two years is probably too long for them to see the full benefit of the bonus. A more frequent bonus payment will make the product more attractive to the people it is aimed at.

[Jane Ellison]

The amendment would require the Government to pay the bonus on Help to Save accounts within six months of the account opening. On Second Reading, hon. Members expressed concerns about the bonus being paid after two years and on maturity, and not more regularly. The Government are not requiring people to lock their money away in Help to Save. People will still have full access to their savings and will be paid a bonus on the highest balance obtained. Even if people are able to save for only six months, they will still be entitled to receive a bonus at the two-year point and on maturity.

We have said a number of times that the purpose of Help to Save is to support rainy-day saving over a four-year period to help people to build a buffer against unexpected financial shocks or changes in circumstances. In light of that objective, we have looked carefully at how frequently we should pay the bonus.

Similar accounts in the Saving Gateway pilots run by a previous Government ran for 18 months. Published research shows that participants had different views on account duration, but many were in favour of extending the period. Additionally, there is peer-reviewed research by US academics on individual development accounts, a similar savings scheme in the US that also provides match funding to help people on low incomes to save. The research concluded that 19 to 24 months is the optimal time period to embed a savings habit.

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[Jane Ellison]

We risk straying slightly off the point, but there has been a lot of debate about weekly and monthly pay in the discussions about the many changes to the welfare system in recent years. Universal credit, which like many other benefits is moving to a monthly-by-default payment, is subject to the same argument about striking the right balance. We think that paying the bonus at two years and on account maturity strikes the right balance, because it gives people enough time to build up their savings and develop a saving habit, while allowing them to access the bonus within an appropriate timescale.

The Government bonus is designed to provide support and a real incentive to those building up their savings over a long period, rather than supporting or incentivising short-term spending. A bonus of up to £600 after two years is an attractive target to save towards, and will encourage people to keep saving, if they can. We do not believe that smaller bonus amounts paid at more frequent intervals would provide the same incentive for regular saving over the long term.

Given the rainy-day nature of the scheme, Members may be concerned to ensure that savers can access their bonus early if they face an unexpected cost or change in circumstances, and I stress that savers can access their money at any time and still earn a bonus on their savings. The four-year duration of the account allows people to start saving again, so they can earn an additional bonus. While I recognise the strong views on this issue, the motivation behind the amendment, and that no one solution will work perfectly for all savers, I think—in light of the argument I have made and some of the evidence I have cited—that we have got the balance right in this regard. I ask the hon. Member for Banff and Buchan to withdraw her amendment.

[Dr Whiteford]

I am disappointed that the Government have not taken on board a simple and straightforward amendment. I am minded to push the amendment to a vote, simply because many Members expressed concern about this matter on Second Reading, and the amendment could be made fairly easily.

Question put, That the amendment be made.