Nest Insight, the research arm of master trust Nest, has launched a new UK research trial to test the effectiveness of an opt-out approach to workplace emergency saving, following disappointing results from its earlier 'sidecar' savings trial last year.

Nest has already been testing so-called sidecar savings, whereby employees can sign up to have their pension contributions go into a rainy day fund before 'overflowing' into a pension. The two-year trial found that take-up on a voluntary basis was low, despite employees being attracted to the idea.

 

Britons saved about 7.5% of disposable income last year, a level boosted by the pandemic after three years of negative savings rates and still lower than most OECD countries. It is estimated that around 11.5m people in the UK have less than £100 of savings to fall back on. The government aims to improve people's financial resilience and wellbeing via the Money and Pensions Service, a co-sponsor of the study. 
 
Nest's new one-year trial will examine whether making payroll saving the default enables workers who want to build up a savings buffer to get started. 

Over the next six months, about 600 new joiners to waste management firm Suez will be automatically signed up to payroll saving with credit union Transave unless they opt out and compared with a control group that is offered saving on an opt-in basis. Nest will work with academics Sarah Holmes Berk, John Beshears and David Laibson from Harvard University, and James Choi from Yale University to do so.

Drawing on early findings from the earlier sidecar savings trial, the hope is that this auto-saving approach will reduce sign-up friction and overcome inertia as barriers to saving.

“Employers have a vital role in helping their staff build greater financial resilience. Schemes offered by employers, such as payroll savings, can help people build a safety net that enables them to withstand short-term financial shocks," said pensions and financial inclusion minister Guy Opperman, adding: “Workplace emergency savings schemes take up is too low, and I look forward to reviewing the findings of this trial."

Head of reward and pensions at Suez, Michelle Sutton, said: “We know that our people are making use of the salary advance service and, by setting the default savings amount at £40 to match the average salary advance drawdown, we hope that it will be an accessible and user-friendly way for staff to build up a savings buffer to draw upon for those unexpected outlays, such as broken appliances or emergency vets fees."

Sutton added: “We have taken care to ensure communications to our new starters on the opt-out model were fully transparent, empowering them to decide if saving is right for them, and we’re looking forward to hearing from those who save on how the trial affects their financial position and attitude to saving.”

Jo Phillips, director of research and innovation at Nest Insight, said the sidecar trial had shown that many employees like the idea of building up short-term savings through automatic payroll deduction but that many don’t get around to signing up even if they intend to.

"In this trial, we’re excited to see what happens when you overcome inertia and remove sign-up friction by switching the default if you do nothing from ‘not saving’ to ‘saving’ whilst, importantly, preserving choice. The approach has the potential to be a real game-changer for financial wellbeing by supporting employees to follow through on intentions to save," Phillips said.