This report sets out an innovative policy to help address low savings levels among lower-income households: a Win & Save Scheme, a hybrid savings and lottery product, transforming the habit of gambling into a form of saving. How could it benefit households on lower income? And how could such a scheme could best be introduced and would operate?
The problem
Household savings provide financial resilience but saving in the UK is declining: 46% of the population did not save any money in the past two years, and many who do save aren’t saving enough.
Households on lower incomes are not only more likely to have a lower level of savings; they are also more likely not to have saved in the past two years and not to hold any saving stock (in a savings account or a cash ISA Government policies, such as the Savings Gateway and increasing the personal tax-free allowance on ISAs, have not succeeded in incentivising short-term savings, especially among lower-income households, who would benefit the most from having a safety net in place
The concept: Win & Save
The next National Lottery licence, due to start in 2023, should include provisions for a prize-linked savings game. Participants would purchase a ticket to win a monetary prize, but a proportion of the ticket price would be deposited into a savings account held by the purchaser, with the remainder going towards a lottery prize fund. Structuring the product in this way would attract consumers from other gambling products to Win & Save and boost their financial resilience.
Building up a savings buffer would be of greater value to lower income consumers than contributing to ‘good causes’ through the National Lottery. Meanwhile, putting some of the principal into the prize fund means that prizes can be larger and the chances of winning greater than they would be under a traditional prize-linked savings approach
What it would mean for consumers
Assuming a ticket price of £2.50, and a modest government subsidy, this would mean that a person buying two tickets a week could save around £250 within a year. If the scheme were to attract a consumer base equivalent to 10% of National Lottery users, this would generate just over £681,000 in weekly prize money. The prizes should be ‘life-changing’ sums for lower-income groups but not set at the same levels as some lottery prizes. We propose a top prize of up to £250,000.
W&S would be available in shops and other outlets as well as online.
- The savings would be channelled either into a default savings account run by NS&I or into an individual’s pre-existing savings account with a financial services provider.
- The Government would provide a subsidy to the savings as it does for ISAs and Help to Save.
Win & Save would allow individuals to experience the fun of entering a lottery whilst creating a ‘win-win’ situation by building up their savings resources at the same time.
