On the first working day of April two Britons received a visit from Agent Million, an employee of National Savings and Investments (NS&I) whose entire job is to knock on doors and tell strangers they have won one million UK pounds. One winner lived in Hampshire and had bought the fortunate Premium Bond in August 2022; the other lived in Surrey and had bought hers three months later. Neither had earned a penny of interest in the interim. Premium Bonds, a government savings vehicle that pays nothing but monthly lottery prizes, are held by one in three Britons. NS&I manages 231 billion UK pounds on behalf of HM Treasury this way, roughly nine per cent of the government’s debt.
Harold Macmillan, then Chancellor, launched Premium Bonds in his 1956 budget, partly to mop up post-war inflation. ERNIE, the random-number generator that runs the draw, is on its sixth iteration. The odds of any single one UK pound bond winning something in a month are 22,000 to one; the prize-fund rate sits at 3.6 per cent. That is a pedestrian return. And yet 24 million Britons pile in.
Most savings instruments (cash ISAs, fixed deposits, money-market funds) are unglamorous by design, and household savings rates reflect the ambivalence. Americans set aside 4.7 per cent of disposable income in September 2025, well below the long-run average. Households in the euro zone saved on average 15.4 per cent last year. Luxembourgers tucked away around 18 per cent. South Koreans saved 35.2 per cent.
Countries that save a lot tend to do so because they are made to. Singapore’s Central Provident Fund was set up by British colonial authorities in 1955 as a cheap substitute for an old-age pension, and Lee Kuan Yew built it out after independence. Today the CPF manages 609.5 billion Singapore dollars (408.5 billion euros) for 4.2m members. Contribution rates reach 37 per cent of monthly wages, split between employer and employee, and the pot pays for retirement, hospital bills and a house. Mercer’s Global Pension Index ranked Singapore fifth in the world in 2025, with its first A grade. The ordinary account pays 2.5 per cent, the retirement account four per cent, both guaranteed by the state.
Rich countries that cannot stomach compulsion have reached instead for nudges. The UK’s auto-enrolment scheme, introduced in October 2012 for the largest employers and extended to all of them by 2018, took private-sector pension participation from 42 per cent in 2011 to 86 per cent by 2022. Opt-out rates hovered around 10 per cent. Total workplace contributions reached 149.7 billion UK pounds in 2024, up by 49 billion UK pounds in real terms on 2012. The Institute for Fiscal Studies has called the policy enormously successful.
Richard Thaler, who shared the 2017 Nobel prize in economics, designed much of the intellectual scaffolding for this sort of thing. His Save More Tomorrow scheme, developed with Shlomo Benartzi and first trialled in 1998, asks employees to commit now to saving a slice of future pay rises. Participants at the first firm saw their savings rate climb from 3.5 per cent to 13.6 per cent in 40 months. America’s Pension Protection Act of 2006 wrote the principle into law. Inertia, which keeps people from saving in the first place, is turned into the thing that keeps them saving once they have started.
Paradox of thrift
None of which settles the harder question: should governments want households to save more? John Maynard Keynes’s paradox of thrift, prudent for the family and ruinous for the economy, is not a museum piece. China has spent most of the past decade trying to coax its citizens to spend rather than save, with thin results; the household savings rate remains stuck above 30 per cent, part of the reason domestic demand refuses to fire. Japan saved its way into three decades of stagnation. Germany’s current-account surpluses, the mirror image of its prudence, keep annoying everyone else. A pound squirrelled away in Premium Bonds is a pound not spent on a pint, a plumber or a pair of trainers.
The argument flips where savings are already thin. Most of Central and Eastern Europe relies on state pensions whose long-run finances look shaky. Bulgaria, Romania and the Baltics spent their post-communist decades building consumption habits, not savings habits, and the demographic bill is now arriving. For these countries the Keynesian worry is academic: higher private savings would finance domestic investment they cannot otherwise raise.
A handful of governments have been inventive about the means. Brazil’s RendA+ bond, launched in 2023, pays an inflation-linked monthly income to retirees. California’s Secure Choice enrols private-sector workers whose employers offer nothing. Kenya tried M-Akiba in 2017, a government bond sold exclusively by mobile phone from 3,000 shillings (about 25 euros) paying 10 per cent. A clunky interface, poor liquidity and a launch six weeks before a contested election saw it raise less than three million euros over six years before being shelved in 2023. The central bank is trying again with a proper retail-bond platform. Estonia, inevitably, lets citizens top up their pensions in about 90 seconds from a phone.
Private-sector ingenuity has copied the Premium Bonds trick. Family Building Society’s Windfall Bond pays 3.25 per cent guaranteed plus a monthly shot at 50,000 UK pounds. Halifax’s big-ticket cash-prize scheme, which used to hand out three 100,000 UK pounds jackpots a month, was wound up in September 2025 (a reminder that these schemes live and die by the marketing budget). Academic work on prize-linked savings in South Africa, Mexico and the American mid-west all points the same way: a small chance of a big prize draws savers that a rational yield calculation never would.
Premium Bonds work because ERNIE compresses a 40-year decision into a monthly thrill. Auto-enrolment works because, once in, almost nobody bothers to leave. The CPF works because leaving is not an option. Make saving habitual and it needn’t be interesting; make it interesting and it needn’t be compulsory. Doing neither, as most rich countries still do, leaves both a low return for the saver and, down the line, a pension bill the state will end up paying anyway.
Photo: Dreamstime.
