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We have taken the power to define the connection with the UK in regulations, rather than doing so in the Bill, in order to provide the flexibility to respond to any future changes in residency requirements in other areas and definitions underpinning the concept of ordinary residence, without the need for further primary legislation. The amendment would remove such flexibility. Any regulations about eligibility for the saving gateway will of course be subject to the affirmative procedure. I therefore hope that the noble Baroness will withdraw her amendment.

Baroness Noakes: I am sorry, but the Minister has not answered my question or that of the noble Lord, Lord Newby: why there should be any need for flexibility around a definition by reference to “ordinary residence”. How could the Government ever define this scheme by anything other than “ordinary residence”? We accept that there may be some need for flexibility in some of the detail, for people such as Crown servants—other categories may come in over time. However, one of the issues that I raised was why that bit is required to be in secondary legislation, not primary. Powers to make secondary legislation should be restricted to things that might change over time, not things that should be fixed points.

Lord Myners: I am most grateful to the noble Baroness for further amplification. I am advised that residency requirements differ across different government services and departments. We are keen for there to be flexibility for the saving gateway residency requirement to be changed in line with any wider changes that might take place. The different definitions of “residence” and “ordinary residence” are generally not defined in statute and may therefore change as a result, in particular, of case law decisions or updated interpretations. We are keen that the saving gateway residency requirements can fit in with any such changes if appropriate.

Baroness Noakes: Well, I will try the second question that the Minister did not answer before deciding what to do with the amendment. I also asked him why there was no restriction to residents. The Minister has explained how residence and ordinary residence would form the basis, but is it possible for somebody to be deemed to

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be ordinarily resident under the draft regulations, which fit within the power given here, without having any residence connection with UK? One aspect of my amendment was to seek to anchor the regulations in at least the mere fact of residence. That is to say, a person had to be resident, but could then go on and have something that deemed him to be ordinarily resident without escaping from being resident.

Lord Myners: European Union law changes may mean that the Government have to extend eligibility beyond ordinary residence. Government and the courts constantly grapple with the complexities of “residence” and “domicile” and their definitions. We have endeavoured to find a simple and straightforward formulation to support eligibility for the saving gateway.

Baroness Noakes: Is the Minister saying that the EU may require eligibility beyond residents or those who are ordinarily resident? I think that he said “ordinarily resident” but my question was about residents.

Lord Myners: I said “ordinarily resident”.

Baroness Noakes: In that case, I return to my previous question. Why is the Bill not restricted at least to residents? At the moment regulations can be made that do not even require residence, which is one leg of the amendment. The Minister has not yet answered that point.

Lord Myners: We believe it is right that people who live or work in the UK and claim one of the qualifying benefits or tax credits should be eligible for the saving gateway. The draft regulations will ensure that people must be ordinarily resident in the UK, in addition to having entitlement to a qualifying benefit or tax credit, to be eligible for the saving gateway. That would mean, broadly, that only people who live or work in the United Kingdom can open a saving gateway account. EU law means that we must extend it to those who work in the UK despite not living here.

Baroness Noakes: This has been an interesting debate. I could not have anticipated that the Government would say that they needed a concept that was other than ordinary residence and needed to have flexibility around future changes if case law were to change. It is a difficult concept and I am also struggling with the extent to which we have to accommodate EU law for people who do not live here.

Lord Myners: Being of a charitable disposition immediately before a Recess, I am happy to admit that I am also struggling. Most of us struggle with the concepts of residence and ordinarily resident, domicile, living and working, et cetera. This might be an area where an offer to write to participants in the debate would give me the opportunity to provide something that is crafted in the language of lawyers but which, having been edited by me and my team, is, I hope, understandable to the lay person. It is complicated. I look across at the noble Lord, Lord Newby, and immediately see that this is one of those times when

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the pursuit of simplicity comes into conflict with complexity. We are trying to find a simple, straightforward way of setting up something that we think is laudable and worth while. I understand that the noble Baroness is asking legitimate questions and I would like to help the Committee by writing to each Member before we look again at the Bill.

Baroness Hollis of Heigham: If my noble friend and the noble Baroness will allow me, I should like to comment because I did not take part in the earlier discussion. I would welcome such a letter if it were to address the situation of, say, someone from Poland who is working in the building trade here and whose wife and children are back in Poland. His earnings are such that he does not qualify for working tax credit but he qualifies for child tax credit, which is an exportable benefit. For these purposes, is he resident in the United Kingdom and therefore eligible for the saving gateway scheme? There are issues which I accept are almost impossible to untangle. Given that that is a high value benefit, it is of some concern.

Baroness Noakes: The noble Baroness, who knows more about the benefits system than all of us put together has, as usual, highlighted some of the difficult areas. I am grateful to the Minister for agreeing to take this away. I look forward to his reply, which I hope will be one of his speedy rather than last-minute versions, when perhaps he will also reflect on whether the balance between primary and secondary legislation in this area is correct. My amendment was intended to probe that as well as the specifics that have taken us into some interesting byways. I look forward to receiving that letter as I am sure do other Members of the Committee. I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

Amendment 10

Moved by Lord Myners

10: Clause 3, page 2, line 24, at end insert—

“( ) a carer’s allowance under section 70 of the Social Security Contributions and Benefits Act 1992 (c. 4) (but this is subject to subsection (3A));”

Lord Myners: In moving Amendment 10, I shall speak also to Amendment 13. Together, they would make all recipients of carer’s allowance eligible for the saving gateway. This issue was discussed in the other place, and the Economic Secretary said that the Government were minded to bring forward amendments. My noble friend Lady Pitkeathley also spoke passionately and eloquently on this subject at Second Reading. I am pleased to be able to bring forward amendments on this issue today. Even without them, we believe that around 225,000 claimants of carer’s allowance would be eligible for the saving gateway through the qualifying benefits, but this amendment adds a further 300,000 carers to that number, taking the total to over half a million. I hope that noble Lords will welcome these amendments. I beg to move.

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Lord Williamson of Horton: I put on the record my welcome for these amendments. Some of us in this House have spent a lot of time saying, “Don’t forget the carers”, most notably the noble Baroness, Lady Pitkeathley, and we are glad to see that they have not been forgotten on this occasion. I have already declared that my wife and I are carers. We are not affected by the amendment, because we do not claim a carer’s allowance, and we do not intend to do so. I am also a patron of the charity Rethink, and in that capacity I have had a good number of meetings with carers. My wife has regular meetings with carers in south-west England, so we know quite a lot about it.

As the Minister may know, some carers feel that they are neglected. Indeed, that has been a feature of life over quite a few years. For myself, I do not think that the financial effects will be all that great, but certainly the effect on opinion among carers will be highly favourable, and that is important. They form a large category, and for that reason we should warmly welcome these amendments from the Government.

Baroness Pitkeathley: Noble Lords will not be surprised to learn that I, too, welcome these amendments, and I think I speak on behalf of many carers when I say how glad we are that the Government have introduced them. They indicate not only that the Government recognise the financial problems faced by carers, but that it would be quite wrong to exclude a group of people who make such a huge contribution to society from the opportunity to take advantage of this modest savings measure. As I said at Second Reading, the original decision to exclude the recipients of carer’s allowance went quite counter to the Government’s previous record so far as carers are concerned. They have been extremely supportive, as set out in the national strategy. I am sure that carers everywhere will welcome this amendment, as I most certainly do.

Baroness Hollis of Heigham: I join my noble friend in thanking the Minister. This is the next step in a whole package of wonderful things that the Government have done for carers, including bringing them within the national insurance credit system for the state pension when their caring duties occupy more than 20 hours. We congratulate my noble friend Lady Pitkeathley on campaigning so actively, and my noble friend Lord Myners on being in a position to deliver what we all want.

Amendment 10 agreed.

Amendment 11

Moved by Baroness Hollis of Heigham

11: Clause 3, page 2, line 28, at end insert—

“( ) pension credit (but this is subject to any regulations made under subsection (4))”

Baroness Hollis of Heigham: Apropos of nothing at all, at some point I hope that Her Majesty’s Treasury will be able to link the child trust fund, the saving gateway and pensions, including the tax-free lump sum, into a lifetime account so that we string the

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beads on to a necklace instead of having a series of separate though highly desirable initiatives. Whether that time will come, we shall see.

I am revisiting an issue I raised at Second Reading, which is to allow pensioners on pension credit to come within the saving gateway. My noble friend responded, as always, fully and courteously but, on rereading, I was not persuaded even by the elegance of his arguments—and he offered us five.

1.45 pm

The first argument was that pensioners are already incentivised to save by tax relief of some £30 billion attached to pension contributions during one’s working life. If that results in a pension, that is great, but someone on pension credit almost by definition—though not entirely—has not got an occupational pension, otherwise they would not be eligible for pension credit, and so has not enjoyed those tax reliefs which, as the noble Lord knows and accepts, favour the better off.

The typical pension credit recipient is a widow, who probably has no history of full-time work and, if there were an occupational pension in the family, it probably died with him. Pension tax relief as a support for pensioners does not particularly help the group on pension credit, which the amendment seeks to help. That was my noble friend’s first argument.

The second argument suggested that they will enjoy personal accounts. That is great and wonderful, and it will take something like 25 years for it to make pension credit redundant and therefore to overcome the need now for the saving gateway.

Thirdly, he argued that pensioners have higher rates of savings. His statistics—I have not rechecked them, but I am sure that I did not misread what he said—were that one in four working households do not have savings, but only one in five or six pensioner households do not, and therefore that is a reason to discriminate in favour of the one and against the other. That is just about statistically significant, but it is not particularly policy significant. Either way, there is a sizeable group without savings who need them. This should be based on need, not on age, gender, or where you live. We can target it. Pension credit is a very good proxy for low income and low or negligible savings up to £6,000. After all, sizeable savings will disqualify you from pension credit.

Fourthly, my noble friend rightly reminded us of the excellent track record that this Government have delivered to pensioners, from free prescriptions to bus passes; like others here today, I am delighted about that. But a free TV licence for the over 75s does not help those under 75 to purchase a new TV set; or indeed if you over 75. My noble friend is right about what has been done, but we have equally done admirably for people of working age.

I will not bore the Committee, but I could gratefully recite a list of excellent initiatives that the Government have offered to people of working age, from benefit rollover on entering work, to linking rules, to New Deal support, to pathway bonuses, to earnings disregards, to tax credits. It is not clear to me that working people are more disadvantaged than pensioners in terms of the support received from the Government, and that

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this is therefore a reason for including the one and excluding the other. They have both been helped, absolutely rightly, and it is arguable that working people have been helped even more proportionately than pensioners.

My noble friend quotes the rise in the basic state pension. I am sure that he would agree—this is the debate about the IPPR report—that a helpful rise in income, which is wonderful, absolutely does not vitiate the need for some modest savings as well. They are not either/or. Indeed, I hope that the extra income offered by the Government in their proposed increases in basic state pension from 5 April will generate some modest margin which, if supported by the saving gateway, could allow pensioners, one of that 17 per cent, for the first time to have some savings. She—it is usually she—would then be better able to manage lumpy expenditure, such as the washing machine, without going into debt or seeking loans from her family, who may be equally hard pressed. She would have the psychological as well as the financial security of a few hundred pounds behind her.

I repeat that this amendment is targeted only on those on pension credit, who are the poorest pensioners, mostly older, single women, but also some men and women who have always had a difficult relationship with the labour market, for whatever reason. I calculate that perhaps half of those on pension credit have no savings at all, and the rest have very little. Old age is full of risk, so many older people feel highly vulnerable, in a literal sense in terms of their health and personal safety but also through their financial precariousness. This would make a difference—a modest one, but a difference.

Finally, given the forthcoming Equalities Bill and its welcome measures to end age discrimination in the provision of goods including financial services, does not a new savings product which effectively has an upper age limit challenge the spirit—and possibly also the letter, for all I know, although we have not yet seen it fully—of such a Bill? In the light of all this, can I today persuade my noble friend to reconsider?

Lord Newby: One of the arguments against the noble Baroness’s amendment, with which I have considerable sympathy, is that a purpose of the saving gateway accounts is to help inculcate the savings habit. The argument is presumably that if you have not acquired the savings habit by the time you reach pensionable age, you are probably not going to.

However, that principle does not apply to other government incentives to save, of which the ISA is the most obvious example. With ISAs, which apply throughout an individual’s life, the Government are giving a considerable incentive to save, much greater than via this provision, on the basis that they want promote saving full stop. If you accept the argument behind the ISA—somebody earning enough to get tax relief on savings is eligible for it throughout their life because the Government think that one should be able to open an ISA aged 65 or 75, rather than it be age-limited—it is difficult to see the logic in not applying that principle to the Bill. I therefore have considerable sympathy with the noble Baroness’s amendment.

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Baroness Noakes: I also give qualified support to the amendment of the noble Baroness, Lady Hollis. I do not think that the amendment is required, as the Government have taken the power to add the credit if they believe that it is necessary. Probably the one thing that would worry me is the extent to which this would add to the cost of the scheme. Allowing the saving gateway accounts to be set up is not cheap, and I worry about the cost. Of course, there would be no pilots on pensioners, so we do not know what the effect would be and whether it would have some unintended consequences.

Like the noble Lord, Lord Newby, however, my first instinct was that this does not help a savings habit because if you are of pensionable age it is too late to acquire it. However, I recognise that considerable numbers of older people, like younger people, have no reserve savings. Anything that assists them to acquire some is worthwhile. Many people cannot cope with even the smallest financial upsets, such as cookers blowing up and things like that. Anything that helps more people to cope with that themselves can only be regarded as a good thing, but I do have a concern about cost.

Lord Newby: To come back on that question of cost, I have been enjoying reading the Ipsos MORI note that the Minister made available earlier. It said that one of the main reasons why people did not continue to save under the scheme was that they had since retired. The proportion of people who would take up this proposed eligibility would not be great. There obviously is a cost, but I wonder what proportion of people would take it up, and just how great that cost would be.

Lord Myners: As the noble Baroness has said, these amendments would make some or all of the claimants of pension credit eligible for the saving gateway. As I said at Second Reading, we greatly value the expertise of the noble Baroness on these issues and have very carefully considered the points that she has made. However, I have to say that we do not necessarily agree. Her main point was that it is wrong to assume that pensioners should necessarily run down their assets in retirement and that pensioners do need income and capital. It is true that people tend to build assets over their working lives and run them down once they reach pension age. This is the so-called life-cycle hypothesis of savings behaviour put forward by Modigliani and others, based on people saving in order to smooth consumption over their lifetime. That does not mean that no one wants to save in their retirement and that is not what I am trying to suggest.

But who should the additional incentive of the saving gateway be targeted on? I do not deny that some pensioners would benefit from this, but many will already have developed a savings habit and have built up their assets. As I said at Second Reading, there is significant support from the Government for them to do that—for example, through tax relief on pension contributions. As the noble Baroness has said, the difference is not large but it is there. The evidence is that pensioners have higher savings ratios than average.

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While I am not trying to argue that no pensioners would benefit from the saving gateway, we believe that it should be focused on people of working age rather than pension age. The other reason for this is the significant support already available to pensioners. The noble Baroness spoke about pensioners who might run down their assets and was rightly concerned most about the poorest pensioners. However, more so than for the rest of the population, there is support in place for pensioners who find themselves without assets; namely, through specific measures to help them to meet particular expenditures, such as the winter fuel allowance or free prescriptions and through support, such as the basic state pension and pension credit. These measures, as the noble Baroness pointed out at Second Reading, are focused on pensioners’ income, rather than capital, but they help to tackle the symptoms of having low levels of assets and make that easier to deal with.

The noble Lord, Lord Newby, asked about ISAs, which followed his observation at Second Reading when I believe he spoke about a class division; namely, that we seem to be giving huge benefits to people who already are on higher incomes or have a higher level of assets. I am very sympathetic to that. There are many benefits to savers and the middle classes, which are significant, welcome and very much a part of government policy, but they are probably underappreciated and undervalued in the hands of the recipient, and in terms of general acknowledgement and recognition of the cost to the Exchequer.

The noble Lord, Lord Newby, asked whether this would be a one-off situation. As Members of the Committee will know, one of the aims of the saving gateway is to get people to save, sometimes for the first time. Therefore, it offers a very strong incentive to save. From our studies, the evidence suggests that this can happen. We have had encouraging responses from the first pilot. We believe that the saving gateway should be a one-off, acting as a catalyst rather than an ongoing incentive, which would also dramatically increase its costs if it was to be hardwired into being a benefit for all time.

That approach was supported by the witnesses who gave evidence to the Public Bill Committee in the other place. In particular, Miss Sharon Collard of the Personal Finance Research Centre at the University of Bristol agreed with the idea that the saving gateway was,

She went on to say that,

In addition, Mr Brian Pomeroy, the chair of the Financial Inclusion Taskforce, also said that it was right,

2 pm

The noble Baroness, Lady Noakes, offered qualified support for the amendment, but went on to say—as I intended to—that it is not required because

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the objective that my noble friend has in mind can be achieved by regulation through the powers being taken.

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