Saving Gateway

The Saving Gateway is a cash saving account for those on lower incomes. It provides a financial incentive to save, through the Government matching (a contribution for each pound saved) money which people save into the scheme. The Saving Gateway was first proposed in 2001 and since then it has been consulted and piloted on twice. The pilots were successful in confirming matching as an effective incentive to save for those on lower incomes. They demonstrated that the scheme could generate both new savers and new saving and individuals continued to save after the end of the accounts. In addition, there were financial inclusion benefits through bringing individuals into contact with financial institutions for the first time.

Following the success of the pilots in promoting saving and financial inclusion, Budget 2008 announced that the Saving Gateway will be introduced nationally, with the first accounts available to savers in 2010 (PDF file Chapter 4 Budget 2008).

Individuals in receipt of the following benefits and tax credits will be entitled to open an account:

Working Tax Credits;
Child Tax Credits paid at the maximum rate;
Income Support;
Jobseekers’ Allowance;
Incapacity Benefit;
Employment and Support Allowance; and
Severe Disablement Allowance.

Accounts will be offered by financial institutions such as banks and building societies and will run for two years. At the end of the accounts the Government will match (a contribution for each pound saved) money which people save into their Saving Gateway accounts. Third sector organisations such as credit unions, social housing providers and the Citizens Advice Bureau have expressed interest in providing information and support on the scheme.

A consultation document, The Saving Gateway: Operating a national scheme, was published alongside Budget 2008. The deadline for responses to this consultation is 4 June 2008.

Saving Gateway: the pilots

The Saving Gateway has been piloted twice since 2001. Over 22,000 people took part in the pilots, achieving a total of £15million in savings and over £5million in Government matched payments. The pilots were positive about the effect of matching as a simple, effective and easily understood saving incentive for those on low incomes. Further information on the two pilots is set out below:

The first pilot was delivered in partnership with the-then Department for Education and Skills (DfES), with Halifax providing the banking facilities. It ran from August 2002 to November 2004, with individuals’ accounts open for an 18-month period, 1,500 participants took part. The pilot took place in five areas: Cambridge; Cumbria; East London; East Yorkshire; and Manchester. People living in these areas were eligible to open an account if they were of working age (16-65) and if they had:

household earnings less than £15k a year;
individual earnings less than £11k a year; or were
out of work or receiving benefits.

Individuals could save up to a limit of £25 per month into the account and up to a maximum of £375 overall for which they received a £1 to £1 match when the account matured.

The final evaluation of the first pilot (PDF file, 400KB), produced by the Personal Finance Research Centre at Bristol University, was published in March 2005.

A larger, £15 million, Saving Gateway pilot ran in the same five locations as the first pilot, as well as an additional area, South Yorkshire. As with the first pilot, was delivered in partnership with the-then DfES, with Halifax providing the banking facilities. The pilot started in March 2005, with accounts running for an 18-month period, as in the first pilot. Around 22,000 accounts were opened. This second pilot was made available to a wider income group; individuals were eligible for the Saving Gateway account if were of working age (16-65) and if they had:

household earnings less than £50k a year;
individual earnings less than £25k a year; or were
out of work or receiving benefits.

The second pilot tested alternative match rates (20p, 50p or £1 match for every £1 saved); different monthly contribution limits (£25, £50 or £125); the effect of an initial endowment (£50); and support from a wider range of community financial education bodies.

The final evaluation of the second pilot (PDF file, 964KB) produced by Ipsos MORI and the Institute of Fiscal Studies, was published in May 2007.

The key findings of the pilots were that:

the Saving Gateway generated both new savers and new saving amongst existing savers;
participants are positive about the effect of matching as a simple and easily understandable incentive to save;
the pilots gave participants a sense of achievement in particular amongst those new to saving and an increased sense of security;
the second pilot showed that those on higher incomes were able to recycle existing savings. This suggests the focus on people on lower incomes - up to around £15,000 household income as used in the first pilot – is about the right level;
there is no need to offer a match rate as generous as pound-for-pound in order to incentivise people to save;
savers learnt through “learning-by-doing” and would welcome support and guidance at account opening and maturity. However, voluntary opt-in to financial education did not work; and
there are financial inclusion benefits from extending a structured matched savings account to people on lower incomes. Many of these benefits are around formalising informal savings, promoting regular saving and getting people into financial institutions for the first time.

Saving Gateway

Saving Gateway: the pilots

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