Bill to help low-income families and younger people save for future

PA

Low-income families and younger people will get help to save for their future under measures in the Lifetime Savings Bill.

The bill will create a new Help to Save scheme, which will support those on the lowest incomes who are trying to save for a rainy day.

Under the scheme, workers in receipt of working tax credits or universal credit who save up to £50 a month will receive a Government bonus of 50% - up to a maximum of £600 - after two years. Savers who continue to use the scheme for a further two years could earn up to another £600.

According to the Money Advice Service (MAS) nearly half of UK adults, equating to 21 million people, have less than an average week's wages of £500 put away in savings.

The bill will also pave the way for the new Lifetime Isas, unveiled by Chancellor George Osborne in the recent Budget.

Many younger people are already in the Isa saving habit, and in 2014-15 3.9 million adults aged under 40 were saving into an Isa.

The new Lifetime Isas, or Lisas, will enable younger people to save for their first home, or their retirement, in the same pot - with an added bonus from the Government.

The new accounts, set to be available by April 2017, can be opened by people aged between 18 and 40 years old.

The scheme will mean savers can put in up to £4,000 a year, and receive a Government bonus of 25% - or up to £1,000 a year. People can save as much or as little as they want each month.

Savers can use some or all of the cash towards a deposit for a first home worth up to £450,000 across the country, or they can access their funds from the age of 60 without charge.

Some commentators have suggested that Lifetime Isas could herald the introduction of a ''pension Isa by stealth'', and will mean future generations increasingly favour Isas - which are built up from taxed income - over pensions - which are only taxed when the cash is withdrawn.

Concerns have also been raised that the new Lifetime Isas could discourage some younger people from saving into a workplace pension under automatic enrolment (AE), where they will get the benefit of their employer contributing to their pension pot.

The Commons Work and Pensions Committee recently said: "Whatever the attractions of the Lisa, it must not be presented as a direct alternative to AE. Savings under AE carry an employer contribution, which will not be available in the Lisa."

The committee continued: "Opting out of AE to save for retirement in a Lisa will leave people worse off."