Sidecar savings pension rollover tool overshadowed by emergency savings focus

Nest Insight's latest research trials have suggested that consumers commonly overlook the pension rollover aspect of sidecar savings vehicles in favour of a greater focus on emergency savings.

The trial introduced a sidecar savings tool, provided by Salary Finance, in participating workplaces as an employee benefit called 'Jars', with the aim of encouraging both emergency savings and further pension contributions.

The savings tool was found to be appealing to many employees, with around six in 10 employees thinking that Jars could help them, increasing to eight in 10 amongst those struggling with bills and financial commitments.

The company also suggested that the idea of saving may have become more salient for some employees who experienced uncertainty and financial insecurity amid the pandemic, with 85 per cent of savers stating that they think saving for emergencies is important.

However, when discussing Jars, Nest Insight found that emergency savings comes "top of mind for employees", while the pension rollover feature is often overlooked, although it noted that it is perceived as a useful feature by most once prompted.

The company also clarified that the learnings were shared before the trial was completed, with eight in 10 Jars accounts have been open for only a year or less, and a quarter for less than six months.

As a result, very few Jars users have hit their savings targets, at which point additional contributions would be made to their workplace pension.

The trial also suggested, however, that there are behavioural and structural barriers that can get in the way of intention translating into action, as sign up levels remained "low", with 98 per cent of those who expected Jars to help them not signed up to the tool.

Considering this, Nest Insight confirmed that future research will test 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 director of research and innovation, Jo Phillips, highlighted the emerging insights as "really encouraging".

She commented: "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.”

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