On the go: Guy Opperman has urged financial services companies to trial sidecar savings products with their employees, warning that they will lose their credibility if they are not seen to be offering their own staff the flexibility they advocate for others.
The minister for pensions and financial inclusion also told Pensions Expert the Department for Work and Pensions would consider adapting the concept into the UK’s automatic enrolment system if thorough tests prove successful.
It comes as master trust Nest launched a two-year trial of a liquid savings account sitting alongside a defined contribution pension pot.
Shoe repair and key-cutting retailer Timpson is the first named participant in the experiment, with several other employers to announce their staff will be offered the product shortly.
The principle of ensuring people have savings over and above a pension is something that we all support
Guy Opperman MP
Opperman used his speech at the launch event to push financial services employers to match their words with actions and join in the trial.
“I also want to slightly pressure all of you,” the minister told a crowd of industry figures. “If you’re not doing it please tell me who is… I’d slightly question why you’re here.”
Opperman added that the concept of a sidecar would be particularly useful to many in his Hexham constituency and other areas that have experience deprivation. He also signalled that sidecars could one day become part of government policy, albeit not before the idea has been proven.
“The principle of ensuring people have savings over and above a pension is something that we all support. We need to do the sidecar pilot, we need to persuade individual companies to sign up… we then need to do a proper development of it but I’d certainly never say never,” he said.
Sidecar aims for resilience
Sidecars involve deductions from a member’s payroll being split between their DC pension pot and a liquid savings vehicle, which in the Nest trial will be labelled an “emergency savings” funds.
When this savings account reaches an appropriate level to ensure resilience to income shocks, the entire contribution will go into the pension pot. If the emergency account is drawn down, it will once again start to be topped up over time.
Nest’s trial will measure sign-up rates, levels of saving and the impact on financial health among participants. The sidecar will be provided by financial wellbeing company Salary Finance, with the research undertaken by the Money Advice Service and the Harvard Kennedy School, while the JPMorgan Chase Foundation will provide support.
