Interest Rates

Lord Tunnicliffe Excerpts

Wednesday 23rd September 2020 Lords Chamber

[Baroness Penn (Con)]

My Lords, perhaps I should also declare my interest as a holder of NS&I savings products. I can understand people’s disappointment at the rate reductions. I reassure my noble friend that the prize fund rate for Premium Bonds, at 1%, even after the reductions, remains competitive relative to the savings market. I remind him that although NS&I has a remit to encourage a savings culture, it also has to balance that against providing value for money for the taxpayer and its position and effect on the broader financial services sector.

[Lord Tunnicliffe (Lab) [V]]

I will deviate slightly from NS&I, important though that institution is to millions of British savers. Noble Lords will know that for various reasons a sizable number of people find it impossible to save at all. One in three adults had no savings at the onset of Covid, and one in four families had less than £100. Step Change estimates that 4 million people took on £6 billion of personal debt in the first months of the crisis—an average of £1,500 each. That figure is likely to grow as we enter a second wave. Does the Minister agree that, important as it is to consider the specifics of incentivising savings, we must give broader consideration to how we enable everyone to have a degree of financial resilience? With the furlough scheme due to be wound up within weeks, what steps are the Government taking to prevent those with no financial fallback experiencing serious hardship in the coming months?

[Baroness Penn (Con)]

My Lords, the noble Lord is correct to say that we need to help those on low incomes to save, so that they have a buffer if they face unexpected financial events. That is why we have introduced Help to Save, a government-backed savings account that offers a 50% bonus on savings of up to £50 a month for those in receipt of working tax credits or universal credit, with a weekly earnings equivalent to at least 16 times the national living wage. Returning to National Savings and Investments, one of the other benefits of NS&I accounts, including Premium Bonds, is the low level of savings, at £25, with which people can start those accounts and access those rates.