MPs call for new savings scheme

MPs want subsidised saving for the poor, not just the prosperous

MPs have called for the establishment of a new national savings scheme for poor people, subsidised by tax payers.

The Commons Treasury Select Committee said a "Saving Gateway" scheme should be set up, with the government partly matching contributions from the public.

The committee said this would be the best way to promote saving among poorer households in the UK.

MPs added that promoting saving among the less well-off should be a higher priority for the government.

In a report on financial inclusion, the Treasury committee said the cost of the scheme would be just over a 10th of the tax subsidy currently given to people who put money into individual savings accounts (ISAs) and their predecessors such as personal equity plans (PEPs).

'Crucial'

"Saving matters even more for the least well-off in society than for the better-off," said the report.

"Saving is crucial to the financial welfare of many people living on low incomes and of other people who may be financially excluded.

"An absence of appropriate saving is a key indicator that people are outside the financial mainstream," they added.

The MPs called for the state to match contributions to the saving gateway with 50p for every pound invested by individuals.

That would better the current 40% tax subsidy on offer to higher rate tax payers who save in pension schemes.

The MPs also said that the importance of saving among the low paid had been highlighted by last year's collapse of the Farepak Christmas hamper saving scheme.

They called for greater consumer protection for such "pre-payment" schemes.