The sidecar savings tool, provided by the trial’s technology partner Salary Finance, has been introduced in participating workplaces as an employee benefit called ‘Jars’. The tool is designed to help employees build up emergency savings and, when a savings target is reached, to put more aside for retirement on top of their normal auto enrolment pension contributions. This latest research shares analysis of administrative data, surveys and qualitative interviews with employees who are eligible for Jars at the participating workplaces.
Sidecar savings idea appeals to many employees, particularly those less financially secure
Around 6 in 10 employees think that Jars could help them, rising to 8 in 10 of those struggling with bills and financial commitments.
Encouragingly, analysis so far indicates that people in the Money and Pensions Service (MaPS) ‘squeezed’ and ‘struggling’ segments are being brought into saving through Jars. These are target groups for emergency saving who may not have previously had a financial buffer in place to protect them from income and expenditure shocks.
More generally, the idea of saving may have become more salient for some employees because of recent experiences of uncertainty and financial insecurity due to the pandemic. Indeed, 85% of employees said that they think saving for emergencies is important. As one employee explained: “I think it’s made me realise just how quickly you can lose an income. It’s shown me savings are more important than ever.”
Automatic payroll saving is highly valued
By saving automatically directly from their salaries, employees explained that they could take their net-pay at face value, avoiding the need to actively account for money they were putting away, or feeling the ‘loss’ of the money after it has been ‘in their pocket’.
One Jars user commented: “You don’t have to look at your wages, it’s already gone. You do it without even thinking about it. It alleviates the stress and worry about financial situations. You know your net sum is your net sum, you don’t have to worry about putting that money aside, it’s one bill out the way.”
Savings persistency is high, and over ¼ of savers making deposits in addition to payroll saving
Once signed up, Jars users are saving persistently, and very few accounts (2%) have been closed. The average savings contribution into Jars is around £100 a month*.
Interestingly, despite the effectiveness of the ‘set and forget’ payroll saving mechanism in getting people saving, savers are still engaging quite actively with their accounts:
• Flexing the savings amount up and down: 15% of Jars users have made a change to their regular payroll savings amount. Of these changes, 76% were increases in the savings amount and 24% were decreases.
• Additional deposits: Just over 1 in 4 Jars users have made additional deposits outside payroll, with a mean value of a deposit at just over £300. This is higher for women, at just over £400, than for men at just over £275.
• Withdrawals: Even at this early stage, it is encouraging to see that 4 in 10 Jars users have made a withdrawal from their emergency savings account to manage financial shocks or smooth income. ‘Struggling’ Jars users are the most likely to have made at least one withdrawal (55% have done so), followed by ‘Squeezed’ Jars Users (42%), with the ‘Cushioned’ segment the least likely to have made a withdrawal (31%). ‘Struggling’ Jars users are also the most likely group to have made multiple withdrawals, with 36% of them having made 5 or more withdrawals, compared with 22% of the ‘Squeezed’ segment and 18% of the ‘Cushioned’ segment.
Pension rollover not seen as a primary benefit, but is largely viewed positively
Because these learnings are being shared before the trial is completed, 8 in 10 Jars accounts have been open for only a year or less, and a quarter for less than 6 months. As is to be expected at this stage in the trial, very few Jars users have hit their savings targets after which point additional contributions are made to their workplace pension. Balances are however building on average over time, despite withdrawals being made, with the average emergency savings account balance after one year standing at just over £550.
When discussing Jars, emergency savings comes top of mind for employees, with the pension rollover feature often overlooked although perceived by most as a useful feature when prompted. One Jars user commented: “I think it's a really good idea. [...] It's helping boost that finance for the later years in life.'
Gap remains between intention to save and action
Whilst many employees think Jars would help them, sign up levels are currently low, although in line with that of other voluntary payroll saving tools. 98% of people who say they think Jars will help them have not signed up.
As in many areas of life, including other workplace benefits, there are behavioural and structural barriers that can get in the way of intention translating into signing up. The paper identifies and explores some of these barriers. In future research, Nest Insight will be testing a range of approaches to reduce or overcome these barriers to participation, including an opt-out joining mechanism working with the FCA Regulatory Sandbox scheme. Nest Insight is currently looking for interested employers and delivery partners to participate in this new research.
Jo Phillips, Director of Research and Innovation at Nest Insight, comments: “These emerging insights from the trial are really encouraging. The evidence we’ve gathered so far suggests that the savings tool is bringing people into saving who may not have previously had any money put aside, and there are already anecdotal indications of a positive impact of on financial wellbeing, resilience and confidence. What’s particularly brilliant to see is that even at this early stage, people are actively using their emergency savings to help smooth their income or deal with financial shocks. Whilst the prevailing norm is often to celebrate increasing balances, success in emergency saving means using that money when needed, which may mean avoiding debts or high-cost credit.
“With the recent addition of ITV as a participating employer, and more analysis planned to understand behaviours over time, we’re building a robust and growing evidence base on the effectiveness of this savings tool. Whilst we hope these early learnings help to inform thinking in the industry and among policymakers, the full research programme is necessarily a long-term effort to allow us to explore the impact over time, including the role of the link to pension saving. We look forward to sharing further insights from our trial as they become available.”
*The mean of all contributions made into Jars over the trial period so far is £97.15. The mean of the mean contribution per account is £108.91.
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