Pensions vs. lottery: which has the best chance of financial success?

Many people dream of a lottery win but you could have better odds of financial success by investing in your pension.

Millions play the National Lottery or EuroMillions each week, hoping to win multimillion-pound jackpots. The prizes may be life-changing but there’s only a "slim chance" of actually winning, said retirement savings platform PensionBee.

Instead, you could be better off putting the £2 cost of a weekly ticket into your pension pot.

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Playing the lottery vs. boosting your pension

Research by PensionBee suggests an 18-year-old playing the National Lottery once a week has less than a 0.05% chance of winning £10,000 at least once by the time they reach the average retirement age of 66. 

But if someone put the £2 ticket price into a pension each week from the age of 18 until 66, they "could boost their eventual pension pot by an extra £9,958".

This is because investors benefit from "compounding" interest, where their returns are automatically reinvested on the stock market, said PensionBee.

Additionally, workers could "benefit from approaching their employer to ask if they will match their increase in contributions", said the Daily Express, to grow your pension pot further.

Investing in dividend stocks is "a far better bet long-term" than playing the lottery, said Ben McPoland on The Motley Fool website. Rather than "delude" himself about a lotto win, McPoland said he can become a shareholder and "instantly have a claim on part of a company's cash flows and dividends".

Investing and choosing consistently top-performing stocks and funds isn't easy though, said The Times. The newspaper highlighted research from RBC Brewin Dolphin that showed the odds of picking the best performer of seven asset classes for ten years is one in 282 million "versus one in 140 million for winning the EuroMillions".

That's why building a diversified investment portfolio is "key to investment success".

You could also get the "lottery-effect", said MoneySavingExpert, by buying Premium Bonds from National Savings and Investments (NS&I) and have a chance of winning a £1 million prize each month.

Unlike pension saving or investing, though, the financial website highlights that your odds of winning the National Lottery are one in 45 million each week, "far outstripping the one in more than 60 BILLION chance of becoming a millionaire through one single Premium Bond in a month".

How to invest a lottery win

But if you do defy the "astronomical odds" and win the lottery, said The Motley Fool, the next question is what to do with your new-found wealth. 

Your winnings can change your life "if managed correctly”, said Balance Wealth Planning. But "poor decisions" could mean you become one of those lottery winners who lose all their winnings within a few short years.

You may find people "coming out of the woodwork" if they hear of your win, warned Lottoland, so decide who you are going to tell.

Plan how to use the money and seek financial advice so it doesn't run out, added the website. Also, think about tax. While the prize is tax-free, "any interest or income generated from the capital could be subject to tax", said Lottoland, making it important to have a "detailed plan".