Making savers winners: an overview of prize-linked savings products

For over three centuries and throughout the globe, people have enthusiastically bought savings products that incorporate lottery elements. In lieu of paying traditional interest to all investors proportional to their balances, these Prize Linked Savings (PLS) accounts distribute periodic sizeable payments to some investors using a lottery-like drawing where an investor’s chances of winning are proportional to one’s account balances. This paper describes these products, provides examples of their use, argues for their potential popularity in the United States —especially to low and moderate income non-savers—and discusses the laws and regulations in the United States that largely prohibit their issuance.