Commentary Section 8 Maturity payments
47.Section 8 specifies how the maturity payment payable at the end of the account’s maturity period is calculated. The maturity payment is the government contribution made at the end of a Saving Gateway account.
48.Subsection (1) contains the method for calculating this payment, which is by multiplying the number of whole pounds in the qualifying balance of an account at the end of the maturity period (“A”) by an amount in pence to be specified in regulations (“B”).
49.The Government has announced that the amount to be specified in regulations will be 50 pence, meaning that the government contribution will be calculated at the rate of 50 pence for every whole pound in the qualifying balance of a Saving Gateway account at the end of its maturity period.
50.Subsection (2) provides that the qualifying balance of a Saving Gateway account is the highest balance achieved during the maturity period.
51.Subsection (3) provides that two sums are to be disregarded when calculating the qualifying balance. Subsection (3)(a) sets out that interest or other sums credited to the account by the account provider are to be disregarded. Subsection (3)(b) sets out that any amounts paid in breach of the limit on deposits specified in regulations under section 4(4), as described above, are also to be disregarded.
52.Worked examples are given below to illustrate how these rules operate in different cases. All figures, including any amounts of interest cited, are purely illustrative, although these examples do reflect certain account features and characteristics previously announced by the Government. As described above, the Government has announced that it intends to provide in regulations that the maximum amount that may be paid into a Saving Gateway account in any month will be £25, and that the maturity period for Saving Gateway accounts will 24 months. The Government has also announced that there will be no requirement upon account providers to offer interest or dividends on accounts.
53.Example 1: An account holder deposits £10 per month for 24 months and makes no withdrawals. The account provider does not offer interest on Saving Gateway accounts. The closing balance is £240, made up of 24 monthly payments of £10. The qualifying balance in this example would be £240, and the maturity payment would therefore be 240 x 50p = £120.
54.Example 2: An account holder deposits £25 per month for 24 months and makes no withdrawals. The account provider offers interest on Saving Gateway accounts and £2 of interest is credited to the account at the end of month 12, with a further £3 of interest credited at the end of month 24. This gives a closing balance on the account of £605, made up of 24 monthly payments of £25 and £5 of interest. The qualifying balance in this example would be £600, as the interest payments would be disregarded under subsection (3)(a). The maturity payment would therefore be 600 x 50p = £300.
55.Example 3: An account holder deposits £10 per month in the first 11 months of the maturity period but makes a deposit of £50 in month 12, in breach of the limit on monthly deposits to be specified in regulations under section 4(4). The account holder continues to deposit £10 a month in each of the remaining 12 months of the account. No withdrawals are made. The account provider offers interest on Saving Gateway accounts, and interest of £2 is credited at the end of month 12, with a further £2 of interest credited at the end of month 24.
56.The closing balance of the account is £284, made up of 23 monthly deposits of £10, a deposit of £50 in month 12, and £4 of interest. In this case the qualifying balance would be £255, as interest payments of £4 and the £25 excess deposit in month 12 would be disregarded under subsections (3)(a) and (3)(b) respectively. The maturity payment would therefore be 255 x 50p = £127.50. As detailed below, a penalty may also be imposed on the account provider under section 21(1)(d), for allowing the monthly deposit limit for the account to be breached during month 12.
57.Example 4: An account holder deposits £25 per month in the first 12 months of the account, withdraws £100 in month 12, and makes no further withdrawals or deposits. The account provider does not offer interest on Saving Gateway accounts. The closing balance of the account is £200. The qualifying balance of the account would be £300 as this is the highest balance achieved during the maturity period. The maturity payment would therefore be 300 x 50p = £150.
58.Example 5: An account holder deposits £25 per month for the first 12 months of the account and then withdraws £100 in month 12. The account holder makes deposits of £25 in each of the remaining 12 months of the maturity period. The account provider offers interest on Saving Gateway accounts, and interest payments of £2 are credited to the account at the end of month 12 and at the end of month 24.
59.The closing balance of the account is £504, which comprises 24 monthly deposits of £25 (£600), less the £100 withdrawal made in month 12, plus £4 of interest. The qualifying balance in this example would be £500, which is the highest balance achieved during the maturity period, once interest has been disregarded under subsection (3)(a). The maturity payment would therefore be 500 x 50p = £250.
60.This example illustrates that where a withdrawal has been made, the account holder must ‘catch up’ to the previous highest balance before further deposits increase the qualifying balance of their account, and therefore the maturity payment due. In this example, the £25 deposits made between months 13 and 16 would enable the account holder to catch up to the previous highest balance of £300. Having caught up to the previous highest balance in month 16, deposits made in month 17 onwards would increase the qualifying balance of the account, and therefore the maturity payment.
61.Subsection (4) requires the maturity payment to be paid by the account provider to the account holder within a period of time, to be specified in regulations, after the end of the maturity period. The Government intends to provide in regulations that the maturity payment must be made to the account holder within 21 days of the end of the maturity period for the account.
62.Subsection (5) provides that the account holder is not entitled to a maturity payment where an account is closed before the end of the maturity period.