Savings (Government Contributions) Bill — House of Commons, 2016-12-12
Topic: Domestic Commerce
Jane Ellison (Conservative, Centre-right): This has been a wide-ranging debate, albeit with a relatively small number of speakers. Many of the arguments today were given a good airing during our Bill Committee discussions. I will try to address the key points raised by hon. Members, and will also set out why we think the Government amendments are necessary First, however, I want to touch on a point of policy that is of some relevance to the debate: a change to charges in the first year. We are making a small change to charges on early withdrawals from the lifetime ISA in its first year of operation, for the benefit of consumers. Although these rules will be set out in regulations, so do not affect the substance of the Bill before the House today, as a courtesy I thought some hon. Members would be interested, given the points raised in oral evidence to the Bill Committee The 25% Government charge on unauthorised withdrawals from the lifetime ISA recoups the Government bonus and applies a small additional charge. This is fair as it reflects the long-term nature of the product and ensures that individuals save into it for the intended purposes, protecting Government funds and taxpayers’ money. However, in 2017-18 only, the bonus will not be paid monthly, as it will be from April 2018 on, but will be paid as an annual bonus at year-end. This could create a difficult case where people face a 25% Government charge up to 12 months before they receive the bonus. We have listened to representations on this point, and so, to improve the product for consumers, I can confirm that there will be no Government charges in 2017-18 If people want to withdraw from their lifetime ISA in 2017-18, they must close their account, and there will be no Government charge to do so. No bonuses will be paid on such closed accounts An individual who has closed their account will be able to open another lifetime ISA in 2017-18 and contribute up to £4,000 into it, if they wish to. From April 2018 the Government bonus will be paid monthly. This means that the 25% Government charge on withdrawals other than for a first-time house purchase, in the event of terminal illness or when the individual is over 60 will apply as per the overarching policy intention Government amendment 3 is about data sharing, and I wrote on this issue to the hon. Members for Bootle (Peter Dowd) and for Ross, Skye and Lochaber (Ian Blackford) and copied in the rest of the Bill Committee. We have heard that the lifetime ISA will provide an eligible first-time buyer with a new choice in saving for their first home, in addition to the existing help to buy ISA scheme. Both schemes provide that generous Government bonus of 25% that can be put towards a first home As we set out when we first announced the lifetime ISA, we intend that individuals will be able to save into both a Help to Buy ISA and a lifetime ISA, but they will only be able to use the bonus from one of the schemes when they buy their first home. Amendment 3 introduces a new paragraph to schedule 1 to allow HMRC and the administrator of the Help to Buy ISA to share information about bonus payments and charge-free withdrawals so that those rules can be policed. It also provides appropriate safeguards and sanctions in relation to the use of account holders’ information, including a criminal offence for unlawful disclosure of that information, in line with HMRC’s established duty of taxpayer confidentiality. The amendment is straightforward and will ensure that the scheme rules on Government bonuses can be effectively administered. I hope that the House will accept it Government amendments 4 and 5 concern residency conditions for Help to Save. That is a targeted scheme, as we have heard, that will support lower-income savers by providing a generous Government bonus on their savings. It is only right that that Government bonus should be available for savings made while an account holder is in the UK or has an appropriate connection with the UK, such as Crown servants serving overseas. The Bill already provides that, as well as meeting conditions in relation to working tax credit or universal credit, an individual must be in the UK to open an account. However, it is currently silent on the rules that apply where an account holder leaves the UK during the four-year lifetime of an account The amendments address that situation by allowing regulations to provide that the monthly payment limit for Help to Save can be set at nil in certain cases. We intend to use that power to provide that an individual cannot make payments to an account, and cannot thereby earn additional Government bonus, when they are not in the UK or do not have the appropriate connection to the UK. That will be supported by a requirement to notify the account provider if an account holder’s circumstances change and they will be absent from the UK. That approach broadly mirrors the arrangements currently in place for ISA accounts. The amendments also provide for a penalty where there is a failure to notify the account provider of such a change. However, that penalty will not apply where there is a reasonable excuse for the failure, and any person who receives a penalty will have the right to appeal. The House will have the opportunity to consider regulations dealing with eligibility for an account before the launch of the scheme These amendments allow an effective targeting of the generous Help to Save bonus, so that it can be earned only on savings made by individuals in the UK, or with an appropriate connection. On that basis, I hope that the House will accept them I will now respond to the non-Government amendments and new clauses. Again, we debated most of these issues at length in Committee. I will try not to recap all the arguments and to summarise the main ones New clause 3 and new clause 7 both concern advice for people opening either type of account. We have heard concerns that people may not get all the advice they need. I have been clear that the regulation of providers is the role of the independent Financial Conduct Authority, which regulates ISA providers and will likewise set the framework for the Lifetime ISA. It is consulting on its approach at the moment. On 16 November, it set out its suggested approach The Government of course want to ensure that people have the information that they need to make important financial decisions. We will provide clear information on gov.uk as well as work with the Money Advice Service and its successor to ensure that they make appropriate and impartial information available. The risk of mandating that people receive independent advice is that it makes investing in these products prohibitively expensive for many people. In Committee, we talked about the cost associated with mandating financial advice of that nature. Therefore, although I understand the sentiment behind those new clauses, I urge hon. Members not to press them and instead look at what the FCA has recommended in its initial suggestions to us.