NEST to offer pensions savings pilot for rainy days

High street retail services provider Timpson is the first company to sign up for a two-year pilot run by auto enrolment pensions body, the National Employment Savings Trust (NEST), looking at so-called ‘sidecar savings’ options as a way of increasing employees’ financial resilience

The project will explore whether the sidecar savings model can improve workers’ ability to respond to financial stresses both currently and in retirement, by creating an optimal level of savings. Under this approach, employees can have some of their salary paid directly into a savings account for a ‘rainy day’, alongside longer-term pension contributions.

According to research by the Money Advice Service (MAS), only 44% of the UK working population have £500 or more in liquid savings to hand for emergencies, and 26% have nothing.

In a sidecar structure, contributions over and above the auto enrolment minimum would be managed through a mechanism designed to create an optimal level of liquid savings, while also maximising long-term savings.

Contributions paid into the combined account structure would at first be distributed between the emergency savings account and the pension pot.

When the balance in the emergency account reaches a predetermined threshold level, known as the ‘savings cap’, all contributions would start ‘rolling’ into the pension pot.

If at any point the saver withdraws funds from the emergency account, and so reduces the balance to a level below the savings cap, future contributions would once again start being divided between the emergency account and the pension pot.

The trial is due to go live within workplaces over the coming months, with workers beginning to make contributions at the start of 2019. Timpson will be the first employer to roll the trial out to its more than 5,600 workers.

Workers participating in the trial will be monitored for two years to assess sign-up rates, how much they save, and the impact on their financial wellbeing.

The JPMorgan Chase Foundation and the Money Advice Service (MAS) will be providing support for the trial, which will be assessed by NEST Insight. The sidecar account will be provided by Salary Finance, working alongside a NEST pension pot.  There are no details as yet about the interest rate for the savings product.

Hang Ho, head of the JPMorgan Chase Foundation for EMEA and LatAm, said: ‘Reducing the impact of unexpected expenses on low income households through the development of innovative solutions designed around people’s lives is vital.

‘Our new partnership with NEST Insight will facilitate testing of a unique emergency savings product provided through the workplace to help low income workers build resilience. We believe this has the potential to improve hundreds of lives.’

Report by Pat Sweet

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