Saving Gateway

The Saving Gateway is a scheme where the Government pays a “match” equal to some proportion of an amount an individual has saved. It aims to encourage people on low incomes who do not usually save to build up a financial asset and get into the habit of saving regularly.

The size of the incentive to save under a matching scheme like the Saving Gateway is the same for all participants. This differs from tax exemption (such as with ISAs) where the amount of the incentive depends on the individual's marginal rate of income tax.

Following two trials, the Government announced in the 2008 Budget that it would introduce the scheme nationally, starting in 2010. It is currently seeking interested parties' views on the operation and administration of the scheme.

Read the full consultation document here:

Building societies and the Saving Gateway

The BSA believes that the final product design needs to be simple. This will help improve take up of the scheme among target groups with low financial capability and make it feasible for providers to deliver the product. A high match rate that is easy to understand should also help encourage participation.

Building societies are well placed to offer the Saving Gateway for a number of reasons. The Saving Gateway is cash only, and safety of investment is a primary concern for participants. Building societies' considerable share of the cash ISA market shows how effective societies can be in the provision of such products.

The interim results of the second trial show that provision by a recognised financial institution added to the level of trust in the scheme – participants were dubious about government provision. In addition, the results showed building societies are viewed as more trustworthy, ethical and customer-focused than the big banks.

The results also highlighted the importance of branches to increase participation, and the first Saving Gateway trial was found to educate participants about using financial institutions. With their extensive branch networks, these outcomes can be amplified at building societies.

Many societies already make efforts to improve the financial literacy of their customers, and this aligns with the government's objective of increased financial capability through the scheme.

The trials are discussed in more detail below.

First trial

The first trial finished in 2004 and offered a £1 match for every £1 saved. Research into the trial by Bristol University found that both the simplicity of the match and the level of the match were important in encouraging saving.

The scheme had a marked impact on some people who increased their saving considerably, but 18% of people still did not take up the match at all. The scheme was also found to have shifted participants' attitudes towards saving, with most having a more positive attitude to saving a a result of their participation in the trial.

Second Trial

The second trial was conducted over six regions, and many different product variations were tested. Final results of the second trial were published in May 2007.

Almost 22,000 participants saved around £15 million and earned a total match of £5 million. In addition, a number of participants that previously did not save reported that the experience had positively altered their attitudes to saving and introduced them to mainstream financial service institutions.

However, it was not entirely clear that all the contributions made to the scheme represented new saving, but rather were the reallocation of other assets. It is suggested, however, that those on lower incomes were more likely to cut back on spending on meals out in order to save.

The report therefore provides some opportunities to learn and adapt the design before it is implemented nationally.