Savings (Government Contributions) Bill (First sitting)

Lucy Frazer Excerpts

Tuesday 25th October 2016 Public Bill Committees

[Kelvin Hopkins]

I have made my point.

[Lucy Frazer (South East Cambridgeshire) (Con)]

Q The Bill provides that you can take your savings out to buy your first home. Are there any other circumstances in which you think you ought to be able to take your money out?

Carol Knight: Yes. We ran a survey to get feedback from consumers and the industry. There were two, or maybe three, other areas where the feedback indicated that including additional lifetime events would be beneficial. One was critical illness and the other was redundancy. Those are incidents that are outside people’s control and that place a huge demand on finances. The other one was buying a second home, too. It is not just about your first-time purchase, but when you start a family and want to move on. Those are three additional lifetime events that we believe could be incorporated within the scheme.

[Lucy Frazer]

Q If you were an independent financial adviser and you were assessing the risk for a client, on a scale of one to 10, where 10 is the most risky and one is the least risky, what would you assess the risk as?

Yvonne Braun: The risk of?

[Lucy Frazer]

Of investing in a lifetime ISA.

[David Rutley (Macclesfield) (Con)]

How risky is the investment?

Carol Knight: A lifetime ISA can have anything within it, so the risk would be determined by the assets you choose to put in it. They will go from low to high. There is no restriction on the investments that can go into a lifetime ISA. It depends on what you choose to put in it, really.

[Lucy Frazer]

Is there anything that you would like to add?

Yvonne Braun: I completely agree that it will depend on the asset mix in the lifetime ISA. I am sure that an adviser would also take into account that 25% will be added, which will help to balance out the risk a bit. We are not sure that, beyond a first home purchase and terminal illness, which are currently in the Bill, additional lifetime events need to be included. If you take redundancy, there are other savings vehicles for that, so I am not necessarily sure that the state needs to step in with a Government contribution to support that. I would probably say the same for buying a second home—I take it that by that you do not mean buying an additional home, but moving the next step up and buying a bigger home.

Carol Knight: Not a holiday home, no.

Yvonne Braun: I think that the main pressure point in terms of housing seems to be for people to get on to the housing ladder in the first place because they are taking so long to get their deposit together. I think that issue is alleviated once people make the second step up.

[Huw Merriman (Bexhill and Battle) (Con)]

Q I want to pick up on something that Ms Knight said, and I have two questions as a result. First, the complexity of this product has been talked about. If you add the critical illness and redundancy rationales for withdrawal, have you not just made it more complex and are you not turning it more into an assurance or insurance-based product as a result?

Carol Knight: I think it depends on how much you want to support people going through their life, and if it is going to be the fundamental of the lifetime ISA to help fund those important events as people go through them. It is a balancing game, really.