The government has set out plans to expand payroll savings initiatives as a core part of its new financial inclusion strategy, published this week.
Nest Insight, which has pioneered research and real-world trials of emergency savings initiatives, has received research funding from the Department for Work and Pensions (DWP) to carry out further work on savings for the self-employed, the Treasury said today (5 November).
Meanwhile, the government has also announced reforms to the National Curriculum, which include a requirement for financial education to be taught in primary schools.
“I want to see a financial services system that works for everyone, where people can access the products and services they need to build their financial resilience and achieve their goals.”
Lucy Rigby, economic secretary to the Treasury
Financial sector commentators have welcomed the developments, highlighting the importance of learning lessons from the success of auto-enrolment and improving financial resilience among the UK population.
In her introduction to the Financial Inclusion Strategy document, Lucy Rigby, economic secretary to the Treasury, said: “When people are financially excluded, participation in our economy and society more broadly can be limited – sometimes extremely so.
“But when people are included, a potential shock can become a manageable obstacle, and aspirations can become achievements.
“These benefits have knock-on effects for our wider society, making financial inclusion a bridge to opportunity and an engine for growth. I want to see a financial services system that works for everyone, where people can access the products and services they need to build their financial resilience and achieve their goals.”
Self-employed savings research funded by DWP
The Financial Inclusion Strategy document stated: “The Department for Work and Pensions has provided further funding for the next phase of research by Nest Insight into savings for self-employed people.
“While the focus of this research will be on retirement savings, rather than the emergency savings buffer that this strategy seeks to address, Nest Insight will also explore the role that an accessible savings pot could play alongside a retirement saving model for the self-employed.”
The government has established a new organisation, the National Coalition of Employers, which the Treasury said would help “drive awareness and adoption of workplace savings schemes”.
In August, the Financial Conduct Authority set out regulatory guidance for companies seeking to offer payroll-based emergency savings funds, with the aim of clarifying how employers can support financial resilience among their staff.
As highlighted in the Treasury’s report, Nest Insight’s previous research had demonstrated that payroll savings “can effectively help people to save if behavioural support is put in place”. In addition, the research showed “no adverse effect on pension contributions”.
Nest Insight ran trials of the emergency savings concept in 2019 and 2020 with companies including Timpsons and the University of Glasgow. Meanwhile, the Ministry of Defence has been running a payroll savings scheme for members of the armed forces since 2015.
In addition, the Treasury said some NHS trusts in England provide payroll savings schemes, and a similar system has been rolled out for staff working at the Department for Environment, Food, and Rural Affairs, the Environment Agency, Natural England, and the Marine Management Organisation.
A ‘welcome step’ for financial inclusion
Will Sandbrook, managing director of Nest Insight, said: “As our trials of opt-out payroll savings models show, workplace savings reach the people who most need support, help them to save persistently over time, and are popular with employees and employers alike.
“Not only are opt-out payroll savings effective, they are also inclusive. A growing body of evidence shows that managing life without the peace of mind and sense of control that a savings buffer gives takes a real toll, which can be harmful to people’s mental health and their relationships. Supporting people to save builds short-term resilience and long-term security. As the Economic Secretary rightly highlights, financial inclusion can be an engine for productivity and economic growth.”
Lou Davey, head of policy and external affairs at professional trustee firm Independent Governance Group, said the expansion of payroll savings was “a welcome step” and demonstrated “the very best learnings” from auto-enrolment.
“Developing stronger savings habits has the potential to help close the retirement inequalities that we see, particularly for women and minority groups that are so often falling behind. Measures must be structured to support saving in the context of modern working patterns, including the disrupted working patterns of those with caring responsibilities.”
Financial education to come to primary schools from 2028
The Department for Education has announced a significant overhaul of the National Curriculum this week, including bringing financial literacy into primary schools as part of a wider “citizenship” element of teaching.
The government said £15m was to be directed from the dormant assets programme to help fund related initiatives.
Economic secretary Lucy Rigby said introducing financial education to the primary school curriculum was “a key intervention to build financial skills and confidence and will help young people navigate the financial system as they get older”.
“Children encounter spending, digital payments, advertising and influence before they can even spell money, and they deserve the tools to navigate those experiences.”
Carol Knight, TISA
The Investing and Saving Alliance (TISA) and its Financial Education Council have campaigned for financial education to be part of the curriculum for years, arguing that children are being exposed to money and finances earlier in their lives.
Carol Knight, TISA’s chief executive, said: “Teaching children about money is like explaining the rules of a game they’re already playing; with greater understanding, they can take part with confidence rather than uncertainty. Children encounter spending, digital payments, advertising and influence before they can even spell money, and they deserve the tools to navigate those experiences.
“This review rightly recognises that financial education is a core life skill, not an optional extra. TISA strongly welcomes the decision to include it as a compulsory part of the primary curriculum – something we have long been calling for.”
Nici Audhlam-Gardiner, chief executive of Foresters Financial and chair of the Financial Education Council, added: “Research suggests that relevant and engaging financial education at multiple points of a young person’s life leads to good savings habits and a better understanding of future financial decisions.
“Starting this education at primary school is key. We look forward to the details behind the review, and in identifying how financial providers can best support and partner with schools in delivering this critical life skill.”
