Top-up for low income savers

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Indy Politics

The Government plans to press ahead with an initiative to encourage people on low incomes to save, it was announced today.

Provisions for the Saving Gateway, under which the Government will contribute 50p for every £1 that is saved by those taking part in the scheme, were included in the Queen's Speech.

Around eight million people who are on certain benefits will be eligible to take part in the scheme.

The Government hopes the initiative will encourage people on low incomes to plan for the future, as well as encouraging them to engage with financial institutions.

Announcing the Saving Gateway Bill, the Queen said: "My Government will also bring forward proposals to create Saving Gateway accounts to encourage people on low incomes to save more by offering financial incentives."

Saving Gateway accounts will be open to people receiving the working tax credit and child tax credit, whose income is below a certain level, as well as those on income support, job seekers allowance, incapacity benefit, employment and support allowance and severe disablement allowance.

People can contribute up to £25 a month to the accounts for 24 months, after which the Government contribution of up to £300 will be added.

A pilot of the scheme involving 22,000 people resulted in £15 million being saved.

The accounts will be offered by a range of financial institutions such as banks, building societies, credit unions and the Post Office.

The move was welcomed by the Association of British Insurers.

Maggie Craig, the ABI's director of life and savings, said: "Any measures to promote the savings habit are to be applauded.

"While the Saving Gateway is specifically focused on people on low incomes over a relatively short period of time, it could and should act as a catalyst for longer-term saving for retirement."