The Government is launching a new pilot scheme aimed at rewarding savers with the chance to win a monthly cash prize.
The ‘PrizeSaver’ will be available through 15 credit unions across the country but will be expanded if it proves a success.
Let's take a look at how the new scheme will work.
What's on offer with Prizesaver?
Savers who open an account with one of those unions will then be entered into a draw, with a top prize of £5,000 handed out each month.
Smaller prizes of £20 will be dished out to a further 20 winners too.
For every pound put into the savings account, you'll get one entry to the draw, but you're limited to a maximum of 200 entries regardless of how much you deposit.
As a bonus, you will earn interest with the accounts as well, though rates will vary depending on the credit union. As an example, the Clockwise Union will pay 1% on any cash held in the account.
Accounts can be opened now, with the first prize draws set to take place in the middle of December. You can open them for as little as £1 a pop too.
If you win, you'll be notified within 21 days of the prize draw taking place.
All savings will be covered by the Financial Services Compensation Scheme, so your savings are safe up to £85,000.
Saving with a credit union
The scheme is designed to try to increase awareness among savers of credit unions as an alternative place for people to save or borrow, particularly for people who may not meet the criteria of high street banks and building societies.
It’s at least partly inspired by a similar initiative over in the States.
The ‘Save to Win’ scheme was also designed to highlight the role of credit unions, encouraging members to put away a whopping $200 million with such unions, picking up prizes of $3.1 million along the way.
This initial pilot is set to run until the end of March 2021, and if it’s deemed a success the idea is that it will be offered more widely.
Which credit unions offer the PrizeSaver account?
Sadly, the accounts aren't available to everyone. These are the 15 participating credit unions, each of which has its own entry criteria.
- 1st Alliance Credit Union
- Bradford District Credit Union
- Central Liverpool Credit Union
- Clockwise Credit Union
- Commsave Credit Union
- East Sussex Credit Union
- Merthyr Tydfil Borough Credit Union
- Nottingham Credit Union
- Plane Saver Credit Union
- Police Credit Union
- Riverside Credit Union
- South Manchester Credit Union
- Westcountry Savings and Loans
- Lewisham Plus Credit Union*
- London Capital Credit Union*
*Accounts not available at the time of publishing, but will be soon.
Winning a prize for being a saver
The scheme is a nice idea as a way to push more people towards using credit unions, but it’s not the only initiative of its kind, where savers have the chance to pick up a cash prize.
Halifax, for example, runs a savers prize draw, for people that have at least £5,000 in a qualifying account.
Then each month it hands out prizes to 1,600 savers. Three savers get the top prize of £100,000, 100 get a £1,000 prize, while 1,500 savers walk away with a £100 prize.
So far Halifax has handed out prizes worth more than £57m, to more than 105,000 winners.
And then, of course, there are Premium Bonds, the nation’s most popular savings account, where each bond is entered into a monthly draw, with two top prizes of £1 million, with smaller prizes all the way down to £25.
There are plenty of winners of smaller sums too ‒ in October for example, the account provider NS&I handed out almost 3.4 million prizes, worth a total of just shy of £97 million.
An important thing to bear in mind with Premium Bonds is that you don’t earn any interest on your bonds ‒ the only return you get comes in the form of those winnings, should your number come up.
The counter to that is that as the accounts are backed by the government, the money is entirely protected.
What do you want from a savings account?
Everyone likes to get something for nothing, whether that’s a free cup of coffee from being a regular customer to cashback when you shop online.
And that’s why offering savers the chance to bag a cash prize, as well as any interest, on the money they put away is a compelling offer.
From the Government’s perspective, it gives savers another reason to consider a credit union for their cash, and the apparent popularity of Halifax’s prize draw, the sheer number of savers with Premium Bonds, and the scheme in the States all demonstrate that there’s an appetite for offers like these.
However, it’s important for savers to think carefully about what it is they really want from their savings account before signing on the dotted line.
If you’re more focused on getting the best possible return, then you may prefer to go for an account that offers a bigger rate of interest, with a guarantee that you’ll get it rather than having to play the odds.
For example, let’s say you want to lock your money away for a couple of years in an ISA. At Halifax, you’ll get a rate of just 0.55%, as well as potentially being entered into the draw, so long as your balance is big enough.
But with Aldermore you can get a guaranteed return of 1.6%, which will really make a difference to your overall balance at the end of that two year period.
Prize draws are a great additional selling point, so long as the account’s fundamentals meet what you’re looking for. It shouldn’t be the main reason for opening the account in the first place.