Nest to trial ‘opt-out’ payroll savings approach

Building on the learnings from its ongoing sidecar savings trial, Nest Insight will test whether creating a savings fund with an opt-out joining mechanism could enable more people who want to save to get started, Nest stated. 

BlackRock and the Money and Pensions Service will be providing additional funding to this project, which will explore whether automatically signing employees up to save for emergencies via payroll will increase participation among those who want to save for the shorter term but do not do it.

The trial will give individuals the choice not to save, since people can opt-out at any stage. 

If they do not choose to opt out, they will automatically start saving a default amount into an accessible emergency savings account each time they are paid, without having to do anything themselves to set this up. However, they will be able to make changes to the amount if they want to.

As Pensions Expert understands, the exact design and workings of the trial have not yet been confirmed, as Nest is currently seeking one or more employers and savings providers to collaborate on the project. 

It was also noted that the trial will be targeting traditional employees, rather than the self-employed.

Since 2019, Nest has been working on its sidecar project, which combines short and long-term savings goals. 

This savings model, which has been tested with several companies, sees savers split contributions between a Nest pension and an emergency liquid savings pot.

After signing up to the sidecar, employees set a rate of contributions and a savings target. When the money is deducted from their pay, contributions above their auto-enrolment payments are diverted into an interest-bearing savings account labelled for emergency savings.

Once the emergency pot is full, the entirety of contributions goes towards retirement savings, but if the pot is drained the split begins again.

Will Sandbrook, executive director of Nest Insight, noted that there are positive signs from its sidecar savings trial: “The savings tool appeals to many employees, particularly those less financially secure, and there’s early anecdotal evidence of a positive impact on financial wellbeing, resilience and confidence among those who have signed up to save.”

He said: “But employee take up in our trial, and in similar models, is low. Finding ways to support people to overcome the behavioural barriers to getting started with short-term saving is a critical area for financial resilience research.”