Self-employed pension trials 'promising'; systemic intervention likely needed

Trials to encourage greater pension saving among the self-employed have delivered “promising” findings, although more substantive action and systemic intervention will likely be needed to achieve a step-change in retirement saving, Nest Insight has revealed.

Held in collaboration with Penfold and Moneyhub, the trials looked to test different forms of flexible savings solutions and nudges, after previous Nest Insight research suggested that control and flexibility were important factors for the self-employed when saving.

In particular, the trial included messaging designed to encourage people to save a percentage of income and smart nudges that prompted users to save any positive difference between their income and expenditure in a month, as well as looking at whether prompts to make a pension contribution were more engaging at particular moments in the tax year.

The findings suggested that some gains could be made from designing message framing and timing around self-employed people’s needs, particularly if these tailored communications are combined with solutions to support saving behaviours.

Indeed, the trial found that sending a salient message at a generally ‘good time’ does make a difference, with some signs of positive downstream effects on different behaviours when testing prompts to make pension contributions at different times of the year.

However, Nest Insight clarified that although the effect sizes were statistically significant, the effect was small, and the timing did not appear to influence the size of those contributions which were made.

It also acknowledged that significant commercial investment is unlikely to emerge organically, and innovation and adoption would take time, pointing out that there is a lack of market appetite for investing in innovations to support self-employed saving.

Despite some encouraging findings, the report therefore concluded that the scope for a big step-change in levels of self-employed retirement saving as a result of messaging is limited.

However, Nest suggested that such innovations might have a much wider reach if they were part of the Making Tax Digital initiative, and developments in open banking and data science over time could also support such an approach.

More broadly, Nest Insight suggested that "bigger, systemic intervention" is likely to be required, particularly around the potential of incentives, retirement saving defaults, and the potential integration of retirement saving into the tax system.

Industry experts had also previously suggested that a facility to encourage pension saving as part of the Making Tax Digital initiative could encourage pension saving among the self-employed, although HM Treasury recently confirmed it has no plans to develop this.

Commenting on the findings, Nest Insight research and innovation director, Jo Phillips, stated: “The design and launch of these pioneering trials is a huge achievement and we’re grateful to the teams at Moneyhub, Penfold and the Nest pension scheme for their dedication to making these ideas a reality.

"The insights from these pilots and the broader programme of work provide valuable learnings about how to improve the design and effectiveness of future tools and initiatives to support self-employed people to save for retirement.

“The findings are promising and demonstrate that prompts, nudges and more flexible saving approaches can successfully boost engagement. But we know that converting engagement to action is a significant challenge when it comes to pension saving.

“These trials show how we can nudge the dial within the current regulatory framework, but if we want to dramatically increase retirement savings levels among self-employed people in the near future, more substantive action and systemic, policy-based intervention will likely be required.”

Pensions Minister, Laura Trott, added: “Automatic enrolment has succeeded in transforming workplace pension saving, but we know that more needs to be done to help self-employed people save for their retirement.

“These trials have demonstrated how simple yet effective technologies can be harnessed to encourage people to engage with pension saving and start building for their retirement. These results will provide strong foundations as we continue to explore opportunities in this area.”

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