New Clause 2
Saving Gateway Accounts Bill
9:45 am
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
It is fair to say that there has been a healthy debate on whether there should be a mandated rate of interest on saving gateway accounts or whether, as in the Government’s view, it should be left to the banks, building societies and other potential account providers to decide whether they wish to pay interest.
Let me explain how we have reached the judgment that we have made. I note in passing that my hon. Friend the Member for South Thanet seems to have made common cause with the right hon. Member for Wokingham, although perhaps for different reasons, in wanting the compulsory approach. I seem to remember his arguing on Second Reading that the payment of interest should be compulsory, but I share the view expressed by the hon. Member for Fareham: we should be permissive in this area.
Let me be clear that, in principle, the Government want to see account providers offering rates on saving gateway accounts. We also want them to offer good defaults for when accounts roll over after the two-year period. We want to engender a market with a number of account providers wanting to compete in offering saving gateway accounts. In those circumstances, relatively few people will want to take out a saving gateway account with no interest if an alternative product on the market offered a good level of interest and a good default option after the end of two years. At the moment we do not think that it is appropriate to specify and mandate a rate of interest.
It is clear that the match rate is by far the most important feature of saving gateway accounts and is the biggest incentive to encouraging individuals to open such accounts. That rate would dwarf any interest that is likely to be awarded during a two-year period. That is the real driver for the programme. However, I take closely into account the comments made by Teresa Perchard of Citizens Advice, and those of my hon. Friend the Member for South Thanet and others, which were that getting into the saving habit is about learning about savings products. Having a savings product that is a gateway account, which looks like an ordinary savings product, can have benefits in that regard.