A new report by think tank the Social Market Foundation (SMF) claims that Britons would save more if the current pensions tax relief system was replaced by a matched savings alternative.
With fewer Britons investing in pensions, more attention is being paid to tackling the problem of how to encourage people to save for their retirement – and a new report by the Social Market Foundation (SMF) makes some radical recommendations.
According to the report, entitled “Savings on a shoestring: a whole new approach to savings policy”, the current tax relief system for pensions only encourages saving amongst those who already save – not the many others the Government wants to put money aside.
As an alternative, the SMF recommends a matched savings scheme where the state pays in a capped additional amount for every pound paid into a pension fund. Not only will this scheme be of no additional cost to the taxpayer, but the SMF claims it will do more to encourage people to be proactive savers than a complicated tax relief system.
The SMF goes further, though, suggesting a lottery system where players are guaranteed a 50p return on a £1 ticket, which would automatically form part of their savings. The remaining 50p would add to a collective prize fund.
In this way, people could play the lottery while contributing to their savings pot.
Jeff Masters, who co-authored the report, commented: “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.”
Moneyhighstreet comments: “These are good ideas, and it’s great to hear more people addressing problem of savings. Would you be more inclined to save for your retirement if you knew the Government was matching every pound you put away with its own contribution?
“In the meantime, higher interest rates on high street savings accounts and ISAs are providing attractive opportunities for savers right now. Be sure to compare rates online to make sure your money works as hard as it can for you.”