As a result, they have to resort to expensive debt when faced with even a minor crisis like the breakdown of a domestic appliance. They are also badly positioned to cope with bigger shocks, like someone in the family losing their job. And they find opportunities that are available to others, such as retaining, denied to them due to lack of funds.

The aim of this project is to understand what combination of incentives – including auto-enrolment and matched contributions – would encourage low-income families to save into a life-course savings account and, just as importantly, encourage them to retain savings in the account until they really need to access them. Its specific outcome will be the design of a product that can be presented to government as part of the solution to the problem of inadequate saving among low-income families because it has been judged practicable by financial experts and likely to encourage saving by low-income families themselves.

The project is generously funded by the Friends Provident Foundation.

Project detail

The research is being conducted in a number of stages.

1. The first stage involves a literature review and desk-based research to establish the benefits of having some savings, to assess the scale of the savings problem in the UK, to bring together all the academic arguments for and against the range of potential features of savings accounts and to study some of the innovative savings products offered in other countries. This stage concludes with a roundtable discussion of experts brought together from academia, government and the financial industry to gauge their views on what a life-course savings account should look like.
2. The second stage of the research is a series of deliberative workshops held around the country with people on low-to-middle incomes who have tried to save over the last two years. The aim of these workshops is to explore people’s attitude to saving, to discover what barriers they are to saving and what might encourage them to save more and to generate ideas for a savings product that would be attractive to people on low incomes.
3. The third stage comprises a number of semi-structured interviews with representatives from financial providers to discuss the findings of the workshops and ensure that any proposed new financial product is viable from their perspective.

Output

The project will result in a final report, to be published in early 2011, that will set out the design of a new life-course savings account that would be attractive to low-income families and viable for financial providers.