Michael Royce, savings policy lead at the Money and Pensions Service, talks about a Nation of Savers and workplace savings.
What are the benefits of workplace savings?
Workplace savings are where an employer sets up a scheme where employees can money into a savings account directly from payroll. The savings are placed into a cash savings account that can be accessed at any time.
By saving directly from salary, before earnings are paid into an individual’s bank account, workers are able to maintain their regular savings habit and build better financial resilience to use for emergencies, unplanned costs, a rainy day – or a treat.
What is MaPS and its Nation of Savers agenda?
Alongside its direct-to consumer and commissioned services, the Money and Pensions Service (MaPS), an arm’s length body of the Department for Work and Pensions, has a statutory duty to coordinate the UK Strategy for Financial Wellbeing with partners from all sectors.
Nation of Savers is one of the core pillars of the UK Strategy. By 2030, we want to have increased by 2 million the number of working-age people on low-to-modest incomes who are saving regularly.
We see the expansion of workplace savings offered by employers as a substantial contribution towards meeting this ambition. Workplace savings are provider-neutral, so can include products offered by building societies, credit unions, banks or fintech providers.
How is MaPS reviewing workplace savings as part of this?
MaPS, in partnership with BlackRock and JP Morgan through their foundations, has been funding Nest Insight, the research arm of Nest, since 2019 to test various opt-in (sidecar savings) and opt-out (autosave) models of workplace savings with employers.
All research findings can be found here. We have evidenced modest success in testing the opt-in model of workplace savings, but today (19 September 2023) sees the launch of the most compelling evidence to date about autosave. This is where the employer sets up ‘saving by default’ deductions from payroll into an account offered by a savings provider, unless the employee chooses to opt out.
What is the research showing?
Since November 2021, Nest Insight has been working with three large employers (Cooperative Group, Bupa Care Services and Suez Waste & Recycling) and two savings providers (Wagestream and TransaveUK Credit Union) on trials of the autosave approach.
The results to date show that autosave is extremely effective at encouraging workplace saving compared to more traditional opt-in models, and that it supports employees’ financial wellbeing. We are not seeing any impact in the data so far on workplace savers’ ability to service their debts or save for retirement.
How can we take workplace savings to the next level?
Simply demonstrating the potential impact of autosave, though important, is not enough on its own. In the year ahead, we will be working with Nest Insight and BlackRock to hold roundtables, which will engage savings providers, government and employer groups to explore ways to expand the provision of workplace savings – particularly the expansion of autosave at scale.
One practical example of how the provision of workplace savings schemes can be simplified, is the Secure 2.0 Act agreed by the United States Congress in late 2022. This eases the path for US employers that wish to automatically enrol their employees into emergency workplace savings schemes.
If you’d like more information about workplace savings and any of the other, key deliverables of the Nation of Savers pillar of the UK Strategy for Financial Wellbeing, please contact me – [email protected].