Savings (Government Contributions) Bill (First sitting)

Jeremy Quin Excerpts

Tuesday 25th October 2016 Public Bill Committees

[Melanie Onn (Great Grimsby) (Lab)]

Q I wonder whether I could follow up on the point about some financial providers choosing not to participate in the scheme at all. Do you have any further information on that? Do you have any percentage figures for organisations that are either not going to be ready or are not choosing to participate in the scheme at all?

Yvonne Braun: No, I don’t.

[Jeremy Quin (Horsham) (Con)]

Q May I pick up on a couple of points made by the witnesses? First, a powerful point was made that, although auto-enrolment has been a success, the self-employed do not have access to it, and this is an option, a vehicle, for the self-employed to improve their long-term savings. Could you expand on that?

Carol Knight: I think that is absolutely true. However, some of the data from the Office for National Statistics indicates that 15% of our workforce are self-employed. But of that 15%, over 50% are over 50 years old, so the lifetime ISA is not a vehicle available to them. To enable those people to benefit from it, there is an opportunity to expand the age at which you can open a lifetime ISA.

Yvonne Braun: I would make exactly that point. A lot of self-employed people do not fit the age restrictions on the product, so for them it is not going to be available. Of course, if they are higher rate taxpayers, the pension tax relief on offer to them looks better than the bonus they would have received under the lifetime ISA. That is also worth saying: for self-employed people, the lifetime ISA is particularly attractive if they are basic rate taxpayers, but not so much if they are higher rate taxpayers.

[Jeremy Quin]

Q I am grateful—it is 15% and 50%. I am a glass-half-full type of person, but I am sure the points were noted.

The other point I want to tease out is the reference to not everybody being ready, and the potential for delay. Hearing what Carol was saying, in particular, I take it that there is no sign that there will be an insufficient number of people to provide a market. There will be a market, and if people have to catch up they will have to catch up. We are offering a good product at an early stage—would that be fair?

Yvonne Braun: That is absolutely right. Our members very much want to make this work for their customers.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

Q A lot has been said about auto-enrolment and those who have been left behind in the process up till now—the self-employed. Given that we know there is going to be a review of auto-enrolment in 2017, is there an argument for postponing this until we deal with auto-enrolment and those who need to be included?

Carol Knight: Not necessarily, no. We need to monitor the effects, without a doubt. We need to look at the take-up of auto-enrolment to see whether there is any discernible drop-out and a corresponding number of people going into the LISA. There are so many unknowns with auto-enrolment that it is difficult to say that we should postpone the LISA because of that.

There are a lot of people who are not going to get caught by auto-enrolment. One of my biggest concerns is about people who earn too little to even fall into that bracket. An increasing number of people have multiple income streams, each of which is too low to get caught. Auto-enrolment is not going to solve the problem for them, but a lifetime ISA could.

Yvonne Braun: I think that question of people with multiple employment will be one that we will have to return to in the automatic enrolment review, because I think that is the very point of the review—to see whether some tweaks need to be made to make it work better for more people.

The point that Carol made about monitoring the outcome is absolutely right. I think the view has been expressed that the risk of higher opt-out rates from automatic enrolment is small, because that has not occurred with the introduction of the help to buy ISA. However, I think it is important to remember that the help to buy ISA is quite a different proposition, because the maximum bonus is much, much lower, and also the bonus is not paid into the actual account, whereas here it actually goes into the individual’s account. So I think the experience with the help to buy ISA should not give us false comfort that the lifetime ISA will not have an impact on automatic enrolment.

It will be really important that we look at what happens from next April, when the lifetime ISA is introduced, and, as I said earlier, it will also be really important that the information and guidance that people receive is very, very clear about the importance of the employer contribution and about not losing that through a switch into a lifetime ISA.