Saving for a rainy day requires discipline, even more so when that rainy day seems so long away. But would the chance to win £1 million a month from a ‘pensions lottery’ encourage you to start saving for later life?
A report by the Chartered Insurance Institute (CII), highlighting the £9 trillion UK retirement savings deficit, has proposed a ‘pensions lottery’ scheme to incentivise people to think about the future and save in a pensions fund.
The idea calls for everyone contributing to a qualifying pension scheme to be entered into a once-a-month draw to win £1 million.
It’s not clear whether this would include a celebrity television show and thunderball numbers, although I’m sure that would help improve the tired image of pensions no end. But is this a serious proposal or simply style over substance?
The pensions gap
The urgent need to plug the pensions gap is hard to argue with. In the words of the minister for pensions Steve Webb:
‘The next generation will face a different world, with increasing life expectancy, the decline in final salary schemes and lower annuity rates. They are going to have to take greater responsibility for saving for their retirement.’
All fair points. Unfortunately, the CII report highlights a public resistance to savings due to tax complexities, a mistrust of the products available, uncertainties about the future savings landscape, and a lack of awareness of the importance of retirement planning. It also points to the cost of long-term care and debt as the key factors driving the retirement gap.
The idea of a lottery scheme doesn’t answer any of these questions. Instead, what it aims to address is the ‘reward gap’ of any form of long-term savings. In the words of Dr Ros Altmann, director general of Saga, who originally put forward the pensions lottery idea, the scheme:
‘[Taps] into the psyche of many people who probably want to feel that there may be something in it for them today, not just in some very distant future.’
A serious proposal
Although this scheme sounds like a bit of a gimmick, the government certainly needs to do something to encourage pensions saving.
Although the start of ‘auto-enrolment’ in 2012, where everyone will be joined into an employer’s scheme or NEST (The National Employment Savings Trust), should change things, currently only half the workforce belongs to an employer’s scheme.
Would a lottery scheme encourage you to save? Is this a wise way to spend £12m a year? And if you think it is, is one prize of £1m a month a good way to divide up potential winnings?
Loading ...
