Saving Gateway Accounts

Getting in the savings habit

The new Saving Gateway accounts are to be rolled out nationally from 2010. The government will make a contribution for each pound saved to an individual that is receiving one or more qualifying benefits and tax credits from a list that includes income support, jobseeker’s allowance, working tax credits and child tax credits paid at the maximum rate.

The accounts which have been piloted twice between 2002 and 2007 are being introduced to promote a saving habit among people on lower incomes by providing a strong incentive to put money aside in the form of top-up cash from the government. Although an evaluation of the pilot schemes found that it was not necessary to match the amounts saved to incentivise people to save.

It is being proposed that a £25 limit on the amount will be matched each month by the government. The accounts will be offered by banks, building societies and credit unions, and will run for two years. When the account matures the government proposes to top up the amount saved, although no decision has been made about how this will work.

The Saving Gateway has been closely modelled on a US concept called the Individual Development Account, which works by matching the money people put in with a contribution from public or private funds.

In America, people often have to use the money for a specific purpose, such as buying their first home, starting up a small business or funding post-secondary education, but in the UK there will be no restrictions on what the money can be used for.

Non-doms will also be affected by the £30,000-a-year fee they will have to pay to live in the UK.

The winners will be wealthier people with children and teetotal, non-smoking non-driving households.