Resolution Foundation publishes briefing note on government savings policies

The Resolution Foundation published a briefing note on 16 January 2023 assessing the Government's policies to encourage household saving, covering ISAs and Help to Save¹. The think tank estimates that total government support for savings, in foregone tax revenue and direct payments to households, is set to reach around £7.0 billion per year by the end of 2023-24 as interest rates rise¹.

The note says the UK has had the lowest saving rate of any G7 country in four of every five years since 1980¹. It finds that 41 per cent of the £1.3 billion of foregone tax revenue from tax-free savings allowances goes to the richest tenth of households, and that for working-age adults around £3 in every £10 saved in ISAs (29 per cent) is held by those in the top income decile¹. Taken together, the richest tenth of households are set to gain just under £800 on average from savings support next year, around 20 times the £38 received by the poorest tenth¹.

On Help to Save, which allows people to save up to £50 a month and receive a 50 per cent government top-up, the note says eligibility is determined by benefit receipt and the scheme is targeted at low-income families¹. It reports high satisfaction, with only 3 per cent of people dissatisfied, but low take-up, with under one in ten eligible participants using it¹. The scheme is estimated to currently cost just £43 million¹.

"Help to Save (which is estimated to currently cost just £43 million) should be extended beyond 2023, expanded by auto-enrolling benefit claimants into the scheme, doubling the monthly savings cap to £100, excluding the scheme from the savings rules in Universal Credit, and operate under a wider set of eligibility criteria in order to allow more low-income individuals to benefit from supported savings."

Resolution Foundation, ISA ISA Baby¹

The note also recommends capping the total amount of ISA savings that are tax-free at £100,000, which it says would affect 1.5 million people and raise around £1 billion per year by the end of 2023-24¹. It suggests the extension and widening of Help to Save could be paid for by reducing the generosity of ISAs¹.

Measure	Figure
Total government savings support by end of 2023-24	around £7.0 billion per year¹
Foregone tax revenue to richest tenth of households	41 per cent of £1.3 billion¹
ISA savings held by top income decile (working-age adults)	29 per cent¹
Average gain, richest tenth of households	just under £800¹
Average gain, poorest tenth of households	£38¹
Current estimated cost of Help to Save	£43 million¹
ISA cap proposed	£100,000, affecting 1.5 million people¹

Why it matters for households

The note sets out who currently receives the benefit of tax-free saving. On its figures, the richest tenth of households gain just under £800 a year on average from savings support, against £38 for the poorest tenth¹. For working-age adults, 29 per cent of ISA savings are held by the top income decile¹. The proposed £100,000 cap on tax-free ISA savings would affect 1.5 million people, according to the estimate¹.

Help to Save is open to people on certain benefits, and the note says under one in ten eligible participants use it¹. Its recommendations, including doubling the monthly savings cap to £100 and excluding the scheme from Universal Credit savings rules, would change who can save what under the scheme if adopted¹. The ISA allowance is not proposed for change in the note; the cap proposed applies to the total amount held tax-free, not the annual amount saved¹.