Inspired by guilty pleasures at the newsagent
We’ll send you a myFT Daily Digest email rounding up the latest Falkirk news every morning.
Take this quick personality test. Imagine it is last week. You have a spare £2. Do you:
a) buy a Euromillions lottery ticket for a return somewhere between 0 and 8,050,000,000 per cent (the record jackpot of £161m was won by a couple from Falkirk);
b) buy two copies of the last edition of the News of the World, keep one and sell the other for a profit of 245 per cent (the going rate on eBay yesterday was £3.45);
c) pay it in to a cash individual savings account (Isa) and watch it grow, tax free, by 3.3 per cent (the return would be sixpence a year if you opened the best-buy Santander Flexible Isa Issue 3)?
I would like to think that, as a regular reader of the Weekend FT, you would consider a), abhor b), and sensibly opt for c).
At first glance, the probabilities would appear to back this assumption. According to lottery operator Camelot, the odds on winning the Euromillions jackpot are around 1 in 16 million which – allowing for multiple ticket purchases – suggests the number of players is a little less than this. According to News International, sales of the ‘Thank You and Goodbye’ edition of its disgraced Sunday tabloid were up 1.1 million to 3.8 million which – allowing for opportunistic multiple purchases – suggests little more appetite for another 120 pages of piety and impropriety. But, according to Which?, there are now 18.6 million cash Isas in the UK… which – allowing for the impermissibility of multiple accounts – suggests the moral majority prefers tax-efficient savings.
As I said, I would like to think that. However, I know the reality is different. Research published by Institute for Public Policy Research two months ago showed that more than 60 per cent of all the tax-relief given via Isas goes to higher-rate taxpayers. Only 31 per cent of families with an annual income below £31,200 have an Isa – and for families with a weekly income below £200, use of Isas drops to 27 per cent. Among these consumers, purchases a) and b) would seem statistically more likely.
If only there was a national savings scheme that could harness the appeal of those guilty pleasures at the newsagent. So when, earlier this week, I heard about plans to combine savings with a “no-lose lottery” and schemes to cash in on a “crime of opportunity”, I was taken by the timing. They are, in fact, just two of the proposals from another think tank, the Social Market Foundation, for making savings attractive to lower-income savers.
A “no lose lottery” would work by guaranteeing people a 50p return on a £1 ticket, which would automatically form part of their savings – with the remaining 50p would go towards a prize fund. But unlike dreary Premium Bonds, the no-lose lottery would feature a live draw and winning numbers.
A ”crime of opportunity” is a reference to making saving part of all casual spending, via a smart-card scheme allowing shoppers to divert money from rounded-up bills or multibuy savings to an account at the check-out.
Other ideas include diverting future pay rises to savings, and a new matched savings scheme whereby, for every £1 a saver puts into a pension, the government adds a matching or proportional amount.
It then occurred to me that a 1-for-1 matching scheme already exists: it’s called 50 per cent pension and Isa tax relief, and it is available exclusively to those earning more than £150,000 a year. Given that they have already won the lottery, metaphorically, where’s the morality in that?
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