Savings (Government Contributions) Bill: Briefing for Lords Stages

The Savings (Government Contributions) Bill is a government bill. The Bill has been classified by the Speaker of the House of Commons as a money bill. Following completion of its passage through the House of Commons, the Bill received its first reading in the House of Lords on 13 December 2016. Second reading in the House of Lords and all remaining stages are scheduled for 12 January 2017.

The Bill makes provision for the two new government-supported savings account schemes: Lifetime Individual Savings Accounts (‘Lifetime ISA’ or ‘LISA’), and Help-to-Save accounts, both of which were announced by the Government earlier in 2016. The Bill would make provision for:

• A Lifetime ISA. This would enable those aged 18 to 40 to open an individual savings account to which they can contribute up to £4,000 each year (up to age 50), and receive a government bonus of 25 percent on those contributions. The Lifetime ISA account holders would be able to access their funds in full to buy their first home (worth up to £450,000) at any time from twelve months after first saving into the account. The funds can also be withdrawn from age 60 tax-free for any other purpose, or at any point if terminally ill. Funds withdrawn in other circumstances would be subject to a 25 percent charge, which would return the government bonus element (including any interest or growth on that bonus) and apply an additional charge to ensure the product is used for long-term saving.
• The Help-to-Save scheme. Working people who are in receipt of Universal Credit and who have a minimum weekly household earnings equivalent to 16 hours at the national living wage or Working Tax Credit would be eligible. The scheme would provide a 50 percent government bonus on up to £50 of monthly savings into a Help-to-Save account. The bonus would be paid after two years; savers would be able to continue to save for a further two years. People could therefore save up to £2,400 and receive government bonuses up to £1,200.

During its passage through the House of Commons, opposition parties were sympathetic to the aims of the Bill; namely to encourage and incentivise saving. However, among criticisms by the Labour Party was that the Lifetime ISAs might lead people to opt out of automatic enrolment to workplace pensions and pension savings—both of which Labour contended would always provide better savings for people than the Lifetime ISA. Labour tabled a number of amendments to the Bill, including six at report stage which were designed to ensure Lifetime ISAs would not have a negative impact on the success of automatic enrolment. The Scottish National Party shared Labour’s concerns and tabled amendments to provide that people would receive advice on the suitability of the Lifetime ISA and Help-to-Save products for each person’s individual circumstance, at the point of application. The SNP also tabled amendments to remove the Lifetime ISA from the Bill entirely. A number of divisions took place on these, and others, both at committee and report. However, the Bill was amended only by a small number of government amendments. This House of Lords Library briefing provides an overview of the key policy background and provisions in the Bill, and a summary of the Bill’s proceedings in the House of Commons.