Clause 16
Saving Gateway Accounts Bill
9:15 am
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I understand the sentiment behind the amendment, which is that it should be made as easy as possible for account holders to continue to save once their accounts have matured. We also agree about the advantages that the ISA offers: the benefits of tax advantage, saving and ISAs are enjoyed by 18 million people in this country.
However, my hon. Friend the Member for South Thanet makes a good point, and we considered the issue carefully before reaching the decision that we did not want to mandate a roll-over account. Let me explain why and briefly mention something about the process. We want to make it as easy as possible for people to continue to save, so we need to make sure that people have a choice. However, we also need to ensure that something is in place for those people who do not make an active decision. Providers will therefore put in place default roll-over accounts, about which customers will be told when they open their saving gateway accounts. That information will be there up front.
As the end of the two-year maturity period of each saving gateway account approaches, providers will remind savers of the default option at maturity, as well as inform them about other options. If the saver does not make any active decision about what should happen to their money, it will move into the providers’ default roll-over account. Providers will be able to choose what that default account should be; it might be a cash ISA, or it might not. The amendment would take away that element of choice, and I understand why the hon. Member for Fareham thinks that that is a good idea.
We have considered carefully whether the type of default roll-over account should be mandated, and specifically whether it should be mandated to be an ISA. However, we have decided to take a flexible approach for three reasons. First, different potential providers have different views on the matter, as the Committee heard in the evidence sessions. A further reason is the point made by my hon. Friend the Member for South Thanet: if people are in different circumstances, it might be that mandating an ISA would not be in their best interests. Secondly, in support of that, last week, Adrian Coles from the Building Societies Association said that doing so
“could preclude an institution offering a better account in some circumstances.”——[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 42, Q78.]
Again, I think that we can all envisage what those circumstances might be. Thirdly, we want to make sure that potential saving gateway providers who do not offer ISAs—and there will be some who do not do so, for whatever reason—are not excluded.
For those reasons, it is right not to be too prescriptive about the matter. Obviously, we will want to keep the issue under review and the Government would, indeed, be very concerned if we thought that the default roll-over accounts that were being proposed when the saving gateway accounts were initially offered were not going to offer reasonable levels of interest.
Different savers will have different needs and we want them to have a choice about what should happen to their money. An ISA will certainly be the right choice for many people, but not necessarily for all. Having heard those reasons, I hope that the hon. Gentleman will seek leave to withdraw his amendment.