The Commission is calling on Government to rebalance subsidies for savers to ensure everyone is encouraged to save, such as through the introduction of a matched savings scheme for low-income groups.
Savings help people meet unexpected demands, smooth peaks and troughs in income and spending, and limit the need for borrowing. In 2015, the Commission found that only 41% of the UK population had any savings, and 13 million people didn’t have enough savings to support them for a month if they experienced a 25% fall in income.
“We would like to see measures to help and encourage every adult to save,” said Chris Pond, former Treasury Minister, and Vice Chair of the Financial Inclusion Commission. “A new matched savings scheme, in which government put in something for every £ saved would incentivise those on lower incomes to save, and improve people’s resilience against financial shock.”
Research undertaken by the Commission suggests that matched savings schemes have a positive impact, with 65% of people making further contributions after accruing the maximum match funding. Each pound placed into a matched savings account is matched by the government at a certain rate up to a monthly contribution limit.
The Commission also recommends that the government consider other creative strategies, such as the introduction of auto-enrolment for workplace savings schemes or a savings element embedded within Universal Credit.
These provisions would further encourage households on low incomes to save, and would promote engagement with mainstream financial services.
The Commission believes the Budget provides a timely opportunity for Government to commit to helping people to improve their financial health. Incentivising savings for those on a low income is vital, it believes, if we are to secure the financial health of the nation.