Savings (Government Contributions) Bill (Second sitting)

Melanie Onn Excerpts

Tuesday 25th October 2016 Public Bill Committees

[The Chair]

We have four minutes now and three Members who still want to ask questions. Can we bear that in mind?

[Melanie Onn (Great Grimsby) (Lab)]

Q I have a quick question. I am pleased that the line of questioning has taken us to problem debt. I am slightly worried that the way in which we are viewing this is through a prism where people are in regular work, on reasonable incomes and perhaps where, if they experience debt, it is a one-off emergency. In fact, a lot of families experience debt over an incremental, lengthier period of time, so they are regularly exceeding their income and then find themselves in a difficult position.

When it comes to the lifetime ISA, is it not the case that lots of people on lower incomes and struggling are not going to get the best deal? They will take the cash LISA rather than the investment ISA and will not benefit as much as other people who are in regular work, who are higher earners and already in a much better financial position than people on lower incomes.

Ed Boyd: On the general point, the reason why our focus has been on Help to Save rather than LISAs is that if you look at those who are just about managing, those who are really in need of just building up savings because they could be hit hardest by some of these shocks, the overwhelming majority of people who will be on universal credit when it is fully rolled out are in deciles 2 to 5. If you are thinking about those people who would really benefit from this, this is the avenue through which we should be pouring our support and efforts in order to try and help them. As I said before, we have not looked specifically at LISAs so it is difficult to comment on the cross-over and effect that they will have on that group, but going back to the previous question of targeting, Help to Save targets that group pretty well.

Joseph Surtees: It is an excellent point that most or a lot of saving products, certainly up to now, have not really thought about the best way to appeal to low- income consumers and the best way they can work with their lives. That is certainly a problem with ISAs and should be a slight problem with lifetime ISAs as well. The really good thing about Help to Save is that it has thought about how to appeal to this group and the bonus is the way that it has settled on that. All the evidence shows that that is overwhelmingly a great incentive and a much better incentive for this group, rather than interest rates or tax deductions or tax relief.

Other things could be looked at in future, such as prize-linked savings or even more innovative ideas such as adapting the auto-enrolment pension system, so that it has an accessible savings pot within in. I think that is slightly further down the road.

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

Q You have identified that the two different measures, the LISA and Help to Save, are targeted at different people in society. If that is the case, do you see these measures as adding not complexity to the system but more choice?

Joseph Surtees: I would agree that they would both be useful. I emphasise that we are big supporters of Help to Save. It is introducing an option for these low-income families that does not exist at the moment, so it is not more complexity; it is, for many, their only choice.

Ed Boyd: They are both hugely welcome, especially Help to Save.

--- Later in debate ---

[Dr Whiteford]

Q Thanks, that is a helpful clarification. I also wanted to come back to something you said earlier about self-employed people. We took evidence earlier today that around two thirds of self-employed people would not actually qualify for a lifetime ISA. I just wondered whether Scottish Friendly had done alternative modelling or had an alternative assessment of the market.

Calum Bennie: No, we have not.

[Melanie Onn]

Q I will follow up along the lines of what the hon. Member for Banff and Buchan asked. Earlier we heard evidence from the Tax Incentivised Savings Association and the Association of British Insurers and their view was very much that a LISA would be complementary to a pension, not in isolation from a pension. Can you clarify your view that people may not actually have a pension and may exclusively go for a LISA? Do you think that will be a secure route for them, in terms of planning for their long-term older age?

Calum Bennie: In essence, yes. The whole traditional world of retirement is changing and a range of products for people to put money aside for their later years makes total sense. We have done research. With the many customers we have who are saving in ISAs and in other savings plans, when we do the research to find out what they are saving for—financial services companies traditionally market for the holiday of a lifetime, a car, or a home improvement and things like that—our research shows that people are actually saving for retirement. They may have a pension, but they are also saving independently in an investment plan. You cannot just force people to save for their later years in pensions; they are saving in all sorts of vehicles for their later years.

[Melanie Onn]

Q But it is very much, for you, a complementary product to pensions—

Calum Bennie: Yes.

[Melanie Onn]

Not in isolation.

Calum Bennie: No.

[Kelvin Hopkins]

Q I am somewhat sceptical about the myriad private savings schemes and have argued the case for a much more comprehensive compulsory state savings scheme for everyone, on top of which people could save in other ways as well as in stocks and shares. What would be the case against having a universal state earnings-related system with defined contributions and defined benefits, which would be extremely efficient to operate, easy to administrate and which everybody would know they were going to get a good deal from? What would be the argument against that?

Calum Bennie: I don’t think there is an argument against that.