Workers to get more help building emergency pot of cash under new trial

Workers will be helped to build up a “rainy day” accessible pot of cash alongside their pension savings under a new initiative being trialled.

The project to build people’s resilience to financial shocks could offer an alternative to forms of borrowing such as credit cards and payday loans if savers find they need emergency cash, such as if a boiler breaks down.

It builds on the success of automatic enrolment into workplace pensions, which has encouraged millions of people to build long-term savings pots for their retirement.

While people’s workplace pensions pots will stay safely locked away, now, they will also be able to build shorter-term savings pots alongside them which they can access when they need to.

The “sidecar savings” trial is due to go live in some workplaces over the coming months, with workers starting to make contributions in 2019.

Timpson will be the first employer to roll the trial out within the organisation of over 5,600 workers.

  • “…it would mean that I don’t have to go to my mum and dad and ask for money, I’d just have it there – it would reduce the stress!” (Under-30, Manchester).
  • “I would feel more relaxed, it’s easier than a credit card, almost like a small payday loan you are saving up yourself. Easier, cheaper and less of a commitment” (Under-30, Belfast).
  • “Having money taken straight out of your wages, you never see it going – that’s a benefit” (Variable age group, Cardiff).
  • “My struggle is having the discipline to put it aside so it would be good for me. Good for people that struggle to put money aside each month” (30-49, London).

Employees do not have to take part and they will sign up if they want to after the benefits of doing so have been explained.

The initiative has been launched by Nest Insight – the research arm of Nest.

The Nest workplace pension scheme was set up by the Government to make sure employers can meet their requirements under automatic enrolment.

Under the new initiative, contributions made above minimum auto-enrolment levels will initially be shared out between the emergency savings account and the pension pot.

This will happen until the amount in the emergency short-term savings pot is filled up to a level called the “savings cap”.

All contributions made after the savings cap has been reached will then go into the pension pot.

But if the saver then takes money out of the emergency savings pot, it will then be topped up again with contributions once again being divided between the emergency pot and pension pot.

Under the trial the savings cap for emergency pots will be set at £1,000 and a “competitive rate of interest” will be paid.

One of the reasons for a savings cap is to make sure people have a good balance of savings and do not end up saving too much in short-term pots.

The trial will be monitored for two years to assess sign-up rates, how much people 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.

Previous MAS research has found many UK workers are in a vulnerable position.

Only 44% have £500 or more in liquid savings to hand for emergencies, and 26% have nothing put away.

The sidecar accounts will be provided by Salary Finance, working alongside Nest pension pots.

While the trial will involve Nest pension pots, those behind the scheme said they are open to the possibility other pension providers also getting involved.

James Timpson, chief executive at Timpson, said: “We know that money worries can have a really negative impact on colleagues’ health, happiness, and productivity at work. We’re delighted to be taking part in Nest Insight’s sidecar savings trial to help our employees become more financially resilient, both today and into their retirement.”

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