Gary Vaux admires the government’s Saving Gateway scheme aimed at low income savers
What would be your reaction if you could get 50% interest on your savings over a two-year period? That tempting deal will soon be available to many social work clients (and even some social care staff) once the government’s Saving Gateway scheme is launched later in 2010.
Saving Gateway is a savings account that will be provided by banks and building societies as well as approved credit unions and the Post Office. The aim is to kick-start a saving habit among working-age people (16+) with lower incomes, and to promote financial inclusion. The big news is that for every £1 saved into a Saving Gateway account, the government will, after two years, contribute 50p. Up to £25 can be saved each month for those two years.
People can access the Saving Gateway if they are claiming income support; jobseeker’s allowance; incapacity benefit; employment and support allowance; severe disablement allowance (now abolished but there are some claimants still getting it); tax credits (with an income below £16,040), or carer’s allowance
All eligible people (as many as eight million UK citizens) will be sent an invitation pack containing:
• A letter of eligibility: this is a letter from HMRC that the prospective saver can take into any approved organisation to open their account. These letters will be valid for three months.
• A list of providers: a list of financial institutions that will be providing Saving Gateway accounts.
• An information leaflet: this will explain all about the accounts and how they work
Advice providers and intermediaries such as social workers will have a major role in ensuring that people are aware of, understand and are able to take up the accounts. HMRC anticipates that participating advice providers and intermediaries will perform two key roles: supporting providers and signposting potential savers.
Many of those who will be opening Saving Gateway accounts will never have had a savings account, and indeed some may not have had a bank account. It is likely that these people will need some extra support in considering opening an account and in maintaining their accounts. This will be especially true where issues of capacity arise. They may also need help at the end of the account’s life to decide what to do next with the money saved.
Social care organisations will also have a role to play in signposting potential savers to where they can find further information about the Saving Gateway. These organisations are likely to include charities, community groups, housing associations, councils and other government departments, which the eligible population come into contact with on a regular basis.
HMRC is preparing an intermediaries’ toolkit, including a training manual, posters and ready-reckoners. The full kit will be available to download in time for Saving Gateway’s launch.
HMRC is trying to deliver the IT to enable the Saving Gateway by April 2010 (and remind me again when the election is due?).
Naturally – it’s not all wonderful news because the list of eligible participants could exclude many young people aged under 25 who are in low-paid employment (surely a key target group). They won’t be getting a qualifying benefit and they are excluded from tax credits unless they are disabled or have a child.
But nevertheless, the scheme has major plus-points and it will be worthwhile local authorities looking at how to make best use of it for service users. It could be especially valuable for care leavers for example – if the local authority saves £600 for them over a two-year period from age 16, that gives them a £900 lumpsum at 18.
The stakeholder relations manager for this project, incidentally, is the wonderfully-named John Pay.
Gary Vaux is head of money advice at Hertfordshire Council. He cannot offer advice by telephone or email. Comments for him should be emailed to Mithran Samuel