The Social Market Foundation advocated trading pension tax relief with a matched savings scheme and creating a “no-lose lottery” in order to rectify the country’s savings gap, saying this in its report “Savings on a shoestring: a whole new approach to savings policy,” which it published today. If you are concerned about your savings approach, you should consider your options for a savings plan simply fill out our quick pension enquiry form to speak to an independent financial advisor.

Traditional encouragement

The report recommends a creative approach on those who are financially vulnerable. It is based on data from the Wealth and Assets Survey and the Child Trust Fund and revealed that those who are already inclined to save follow traditional encouragement but those who aren’t do not.

Jeff Masters, co-author of the report, said, “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.”

The report’s idea of a matched savings scheme is that the government would put in an amount of money for every pound paid to a pension. The amount would be capped. It argued that this would be more progressive than the current system of tax-relief, which is complex, and that the new system would cost less for the taxpayer. This news does bring slight concerns and could change ideas for savings plans. It is important to look at what is already out there.

Additionally, the SMF suggested the introduction of a new savings smartcard, which would allow deposits into savings but not withdrawals and could encourage small change deposits into these accounts at supermarket checkouts or overpayment of bills.

The report also called for a lump sum to be paid for tax credits, meaning people would have to save this amount, a “save more tomorrow” scheme encouraging employees to pay salary increases into savings, and a scheme where shares in public property such as roads or banks would be given to the public.

Masters added, “As households are still dealing with the aftershock of the financial crisis, we desperately need creativity from policy makers, banks and businesses to help people who don’t much like to save to acquire assets. Given the scale of the challenge, a radical rethink of savings policy is needed.”

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