Prize-linked savings accounts swap some or all of a normal guaranteed rate for entries in a cash prize draw. Larger balances earn more entries. The draw still runs on a fixed schedule. Win or lose, every dollar deposited stays in the account.
The design looks like a marketing stunt until the record shows otherwise: millions deposited through US credit unions, a lab study that holds expected value constant, and a UK government product running since 1956. The sections below cover how the pull works, what the evidence shows, and the catch that still needs checking.
The story in five parts
The draw picks winners at random. The deposit never joins the wager. Miss the prize and the balance is still there.
Michigan credit unions launched Save to Win in 2009. Thousands of people with little prior saving opened accounts that first year.
When both options paid the same on average, more participants deferred for the prize-draw version.
NS&I's Premium Bonds pay prizes instead of interest, and still rank among the UK's largest personal savings products.
Every prize-linked product has to show it is not just shifting money between accounts. Michigan's evaluation asked that of the people who opened them.
A prize-linked savings (PLS) account takes some or all of the interest a normal account would pay and turns it into a shot at a cash prize. Chance scales with balance: more on deposit means more entries. What gets randomised is the set of entries, never the money itself.
People overweight a small chance at a large prize relative to its true expected value, the same pattern that makes ordinary lotteries profitable for the house. PLS borrows that pull and drops the part that makes a normal lottery a bad trade: staking the ticket money.
The prize is the only wager. The balance that earned the chance never sat inside it.
Once the mechanism is clear, the next question is whether anyone has actually shipped it. Two programmes have, under very different rules: a US credit-union pilot from 2009, and a UK government bond older than the commercial internet.
Could a chance at $5,000 get non-savers to open a savings account at all?
In 2009, Michigan credit unions worked with the D2D Fund (Doorways to Dreams) to launch Save to Win. Every $25 deposited earned one entry into monthly and annual prize drawings, capped at 10 entries a month. Prizes ran from $25 up to $5,000.
Year one produced 11,666 new accounts and $8.56 million in savings, about $734 per depositor on average. North Carolina and Washington had their own versions by 2013. Save to Win now runs through more than 100 credit unions across the country.
What it teaches: Casting part of the return as a lottery-style prize, in place of a slightly higher sure rate, moved real deposits at real scale. The programme's own evaluation found that group included people who had otherwise been non-savers.
What does the same idea look like after almost seventy years and full government backing?
NS&I, the UK's state-backed savings institution, has offered Premium Bonds without a break since 1956. There is no interest payment at all. Every £1 bond enters a monthly prize draw funded by a pool sized like a modest annual rate. Prizes run from £25 to £1 million, and the full amount put in can be withdrawn at any time.
The product now holds tens of billions of pounds across millions of savers, which puts it among the country's largest personal savings products. Nearly seven decades of continuous operation under direct government backing is the durability test few commercial pilots ever face.
What it teaches: A product that pays only prizes, with zero guaranteed interest, can stay popular and durable at massive scale when a credible institution fully guarantees the principal.
Adoption numbers from Michigan and the UK show people opened these accounts. On their own, those numbers leave open whether the lottery structure did the work, or marketing, relationship, and branding did. A controlled lab experiment isolated the payment structure itself.
More people waited under the lottery-style option. Both arms paid the same on average. Framing the deferred payment as a prize draw still raised how often participants chose to defer. The effect landed hardest among men, self-reported lottery players, and people with the lowest bank balances. That is the group a standard interest rate usually fails to move.
Field take-up and a clean lab result still leave the most common objection on the table. Does the product create genuine new saving, or does it only pull balances out of ordinary accounts into this one, with no rise in how much anyone actually set aside?
Save to Win's research went past deposit totals and looked at who opened accounts. It found the programme disproportionately reached non-savers, lower-income households, and people with little or no emergency savings, the group substitution is least able to explain. That finding is specific to that programme. A prize-linked product launched elsewhere still needs the same check; Michigan's result does not travel on assumption alone.
A second limit sits under that one. A pure prize-linked structure with no guaranteed rate, the Premium Bonds model, still lets inflation erode the real value of money sitting in the account. The nominal deposit stays intact. “You can't lose your deposit” and “your money keeps its purchasing power” are separate promises, and only the first one is on offer.
Designers also have a line to watch. Lottery framing stays honest only when the underlying account still does ordinary savings work: easy withdrawal, no lock-in beyond what a normal account would require. The prize layer sits on a fair product that still handles day-to-day saving.