Government should offer leg up with savings
Monday, 13 November 2006 12:00
The government is being urged to offer Britons a leg-up on the savings ladder, by providing regular savers with a £250 boost.
In an effort to get the worst-off in society saving, influential think tank the Institute for Public Policy Research (IPPR) recommends the government add 50 pence to every pound saved by people on benefits.
The research points out existing government savings schemes, such as ISAs and stakeholder pensions, are better for higher earners than the low-paid as the benefits are based on how much tax an individual pays.
By contrast, there is very little encouraging the worst-off in society to put money away for their future.
"When your income is less than £150 a week, every penny counts," said Ian Kearns, IPPR deputy director.
"The government currently spends £1.75 billion on saving incentives but these go disproportionately to those who are better off because they are related to the amount of tax that people pay.
"Higher-rate taxpayers get the best incentives and people whose incomes are too low for them to pay any tax don't receive any incentive at all."
And the IPPR is calling for the nationwide roll-out of existing schemes to boost savings for the worst-off in society.
The government has been running trials of its Saving Gateway schemes for four years now.
These see the government match the amount of money people save pound-for-pound, up to a limit. This product is currently being piloted in East London, Manchester and Cambridge. Of those that took part in the schemes, eight in ten said they were saving regularly at the end, compared with fewer than one in five at the start.
And the success of these schemes means the chancellor should roll them out nationally, the IPPR said today.
"We know that these schemes can kick-start a long-term savings habit and help the poorest in society to look after themselves and their families," Mr Kearns said.
However, the IPPR argues the amount of money should be heavily limited. The government would only provide this extra 50 pence for the first £500 invested over two years.
This is equivalent to someone saving just £20 a month, or £4.80 a week.
The extra cash would also not be available for two years, and Britons could only enter a savings gateway project once in their life.
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