Replacing tax relief on pensions with a matched savings scheme and setting up a “no-lose lottery” could help plug Britain’s savings gap, a think tank said.
The current tax relief system only encourages saving amongst those already inclined to save, the Social Market Foundation (SMF) said in its report Savings on a shoestring: a whole new approach to savings policy.
The report said a matched savings scheme where the state puts in a capped additional amount for every pound paid into a pension would be more progressive than the current system.
It added a matched savings scheme would be cost-neutral to the taxpayer and more likely to encourage people to proactively save than offering tax relief, which was too complicated.
SMF also suggested a lottery system where people were guaranteed people a 50p return on a £1 ticket which would automatically form part of their savings.
The remaining 50p would go towards a prize fund, with a live draw to build excitement. This builds on an idea put forward by Saga director-general Ros Altmann in May to use a lottery, paid for by the industry, to incentivise saving.
Other SMF recommendations included the creation of a “save more tomorrow” scheme where employees agree to put any salary rises directly into a savings account, and giving shares in public assets like banks or roads to the public.
