It’s official- saving for a pension is a Lottery. New wacky ways to encourage saving announced.

photo by lisa brewster

There’s nothing like thinking outside of the box, but we are concerned that ‘leading UK thinktank’ the Social Market Foundation (SMF) are coming across as  mad as a box of frogs after their latest proposals include a pension lottery, and topping up your pension at the till.

The SMF’s latest report, ‘Saving on a Shoestring’, looks at why some people find it hard to save, based on analysis of the government Wealth and Assets Survey and the Child Trust Fund administrative data. Their major bugbear with the saving incentives currently available is that it only works for the proportion of people who are inclined to save anyway. This backs up all analyses of the Child Trust Fund which showed that it was largely middle class parents, many of whom were already saving for their children, who took advantage of the tax free savings vehicle.

“With more than one fifth of households having more debts than savings and people in the UK saving substantially less on average than their European counterparts, the scale of the savings challenge is huge,’ said Jeff Masters, the report’s co-author. The SMF are therefore recommending a radical new approach...

Gambling with your pension savings

The SMF’s frst proposal is a ‘no lose lottery' which would guarantee people a 50p return on their £1 ticket, which would automatically form part of their savings. The remaining 50p would go towards a prize fund. Or, put another way, you are spending 50p on the lottery and 50p on your savings.

This idea hopes to tempt those individuals who will often spend £5 or more a week on the current National Lottery, despite not having enough money to save for the future. Don't they realise hoping to win the lottery is forward planning?

Six eggs, a loaf of bread and a comfortable retirement please

The SMF also wants to introduce  a savings ‘smartcard’ which would allow people to pay small amounts of money into a savings account but not withdraw it. People could quickly and easily channel cash into their savings by rounding up grocery bills, for example, at the check-out of supermarkets or other shops.

This is actually not a new idea, or even SMFs own –Sainsbury’s Finance launched a SaveBack scheme five years ago which allowed customers with a SaveBack card to round up their grocery bill transferring the balance into the SaveBack account – although you can access the saved cash if you want or need to, unlike the SMFs proposals.

Recent research from Sainsbury’s  suggested that some 15.8 million potential savers would be willing to make an average deposit of £60 each month at the supermarket till, if such a service was available to them.

And why not combine two genius ideas, by linking this Smartcard Savings scheme with a lottery prize to further compel encourage reluctant savers?

Tax Credit Bonanza

Or, why not pay tax credit recipients a smaller amount every week but roll the excess up into a big fat lump sum ‘to remove the bias towards immediate consumption inherent in the current tax credits system.’ If those affected were most likely to dash down to their local savings establishment or pensions provider and whack it all in this could work. Or the widescreen telly and games console industry could get a financial boost.

Robin (Hood) from your pension

But it isn’t enough to tease the not-so-inclined with bizarre promotions into providing for their own futures, the SMF also want to fiddle with the much-fiddled-with tax relief on pension contributions too.

In their most controversial suggestion, the SMF recommends scrapping the current tax relief on pensions, and replacing it with a like-for-like contribution for everyone, up to a fixed maximum limit. While this would undoubtedly help the lowest earners, the scent of Middle England’s outrage has already reached the politicians’ flaring nostrils...


  • Dick
    If they want people to save for their pension, then the simplest way is scrap the state pension. If you don't save, then you don't get any handouts in old age, or you continue to work until you die.
  • Haggis
    Encourage people to save more and consequently save less? Seems like the perfect way to stimulate demand in a failing economy......

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