SMF Recommends ‘Save & Win’ Lottery Scheme

The UK think tank, the Social Market Foundation, has suggested that the National Lottery implement a ‘Win & Save’ scheme. The scheme would help to address low savings rates amongst Britons by diverting a portion of the ticket price into a savings account for the player.

Black and white numbered lottery balls against a blurred background.

The lottery savings scheme could help players to save up to £200 a year. ©Chini Garay/Pixabay

What Is the ‘Win & Save’ Scheme?

The Social Market Foundation is an independent public policy think tank in Westminster. The SMF has a trusted reputation and is regarded as one of the UK’s top 12 think tanks. It states that its main priority is “to advance the education of the public in the economic, social and political sciences”.

One of the SMF’s latest ideas involves radically reforming the National Lottery. According to the think tank, four in ten adults have less than £100 in savings. Further to this, 46% of Britons have not contributed to their savings over the last two years. This means that a large section of the population is in a position of financial risk, particularly if another financial crisis happens.

“Britain’s poorest households are worryingly short of savings to fall back on if bad luck strikes. We should use the pleasure of playing the lottery to drive an innovation that would help them build up some vital financial reserves.”Scott Corfe, Research Director, Social Market Foundation

This is where a lottery savings account could provide valuable and much-needed help. Statistics show that people who are on low incomes are spending a disproportionate amount of their income on lottery tickets. This shouldn’t be confused with thinking that more lottery tickets are bought by low-income players. Lottery tickets are just as likely to be bought by people from any economic background. However, the cost of a lottery ticket takes far less of a dent out of the finances of a wealthy person. In effect, the proportionate lottery contribution made by low-income players is seven times the contribution of the wealthiest lottery players.

Since its outset, the lottery has been dogged with claims that is a “tax on the poor”. This is an exaggeration, but it is true that more could be done to help players with low incomes. The SMF suggests that a ‘Win and Save’ scheme could help regular players to save as much as £200 a year. £2.50 of the ticket price would go into a prize fund, and the rest would be funneled into a personal savings account.

Prize-Linked Savings Are a Global Success

Prize-linked savings accounts aren’t a new concept, although they are not commonplace in the UK yet. They have been described as a “no-loss lottery”, which incentivizes those who already play the lottery to start saving. Similar schemes already exist in the US, where they have been met with a positive reception. ‘Save to Win’, which was introduced in 2009, is one of the largest PLSAs. It started out in Michigan and has now been rolled out in 11 states. According to the Doorways to Dreams Fund, a non-profit which aims to better financial security for low-income Americans, 56% of Michigan’s PLSA participants were non-savers before joining the program.

While PLSAs are particularly popular in the US, they can be found around the world. In fact, they are the most common type of savings account in Iran, as they are seen to conform to Islamic law. In South Africa, the Million a Month Account helped adults without any form of a bank account to start savings accounts. However, the scheme was closed down after it was sued by the state-run lottery.

In the UK a similar type of lottery bond has been popular with savers since 1956. Premium bonds are issued by the government’s National Savings and Investments agency. They are different from a conventional lottery, in that it is the interest, not the stake that is gambled. Each month, all of the bonds are entered into a prize draw. The government then buys them back on request, for the same price. Prizes range in value, from £25 to £1,000,000. The minimum purchase for premium bonds is £25 and investments must be kept for at least a month to qualify for a prize.

While the UK already has premium bonds, it could be argued that a ‘Win & Save’ scheme is unnecessary. However, there is a difference between the kind of scheme that the Social Market Foundation is suggesting and premium bonds. Premium bonds are generally held by an older and wealthier generation. In contrast, the ‘Win & Save’ scheme would make a bigger difference by helping those who really need it.

Scott Corfe, the SMF’s Research Director further explained why he chose the National Lottery for the savings scheme.

“The National Lottery has done a great deal of good. In its next phase, it should be reformed to help poorer households help themselves to build up savings without giving up the fun of playing the lottery.”

The national lottery is run by the state but operated by the Camelot Group. Its license is next due to be renewed in 2023. The SMF says this is when the government ought to persuade Camelot to introduce the ‘Win & Save’ scheme. It argues that if the Treasury can spend £3 billion a year on subsidizing ISAs, then savings schemes such as this lottery-based one are just as valid. In fact, it would cost less and have a more beneficial influence on low-income savers.

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