Nest Insight emergency savings trial shows ‘very encouraging’ results

The trial, launched in 2021 with Suez Recycling and Recovery UK as the employer and backed by the BlackRock Foundation and the Money and Pensions Service, aimed to determine whether making payroll saving the default option would enable more people to build up emergency savings pots.

Around 11.6mn people in the UK are thought to have less than £100 in savings to rely on, a problem exacerbated by the cost of living crisis.

Under the trial, employees at Suez are automatically signed up to put away £40 a month unless they choose to opt out. While preserving the choice of whether to set aside savings, Nest Insight said the scheme removed hurdles that would otherwise have to be cleared in order to sign up to such a plan.

Participating employees are able to change the amount they save, withdraw their savings quickly, and leave the scheme at any point, while the employer is able to communicate with savers and ensure they are making informed decisions.

The trial saw the Suez scheme compared with a control group, who were offered the savings scheme on an opt-in basis. After six months, the results suggest that the “autosave” approach is much more effective at boosting participation rates and increasing the amount employees are saving — 53 per cent participated in the opt-out scheme, while just 1 per cent participated in the opt-in initiative.

Early results, likewise, suggest that savings rates were higher in the opt-out scheme, averaging £68 a month against less than £1 in the opt-in scheme. When comparing only those participating in either scheme as opposed to the total sample population, the average balance in the opt-out scheme was £129.99, while the figure for the opt-in scheme was just £29.34.

Finally, the results so far show no impact on opt-out rates from the company’s pension scheme, even where the emergency savings pilot is offered alongside it, though the long-term impact is not yet known.

Jo Phillips, director of research and innovation at Nest Insight, said: “We are very excited by these early trial results, which indicate the effectiveness of autosave as a way of supporting payroll saving among employees who may need it most. 

“Those least likely to have savings tend to also be those least likely to make active choices, due to limited bandwidth and lower levels of financial confidence. In an autosave model, however, the need for an active decision falls to those who know they don’t need or want to save — a group more likely to be financially confident and to be saving elsewhere.”

She said employers were looking for “affordable ways” to support their workers’ financial resilience during the cost of living crisis, and an “accessible savings pot” could be considered “a self-funded insurance policy, allowing an individual to pay for unexpected expenses without having to turn to expensive forms of credit”. 

“We’ve also seen from our wider programme of work that emergency savings accounts can be used to manage expenditure across a pay period — a strategy that could be really helpful in the context of rising costs,” Phillips said.

She added that Nest Insight will “continue to assess the effectiveness” of this approach until the end of 2023, in order “to understand the long-term impact on participation rates, balances, pension saving participation and the impact on financial wellbeing among a larger population of employees”. 

“The overall trial will compare around 600 Suez newjoiners who are offered payroll saving on an opt-out basis, to a control group who will continue to be offered payroll saving on an opt-in basis,” she explained.