Helping people build their savings may seem counterintuitive in the current economic climate, but there is always a case for encouraging people to put aside what they can afford when they can afford to do so to enhance their financial security.
This notion underpins the Nation of Savers pillar of the UK Strategy for Financial Wellbeing, being led and coordinated by the Money and Pensions Service, which operates UK-wide as an arm’s length body of the Department for Work and Pensions.
Between now and 2030, Nation of Savers is focused on increasing by two million the number of people of working age on low to modest incomes who save regularly.
These are people that have the means to save yet aren’t already putting money aside as regularly as they can. And we don’t mean saving for the sake of saving – we want people to build accessible savings pots that they can draw on in times of need to help meet unexpected costs or bills.
This is because our evidence strongly suggests that being able to build a savings buffer not only enhances a sense of financial security, it can also have a positive impact on people’s mental and wider wellbeing.
To achieve our ambitious target of two million new savers, we must work proactively with partners in financial services, government, and workplace/community settings. We are doing this based on three core recommendations that will take us initially to 2024, then once reviewed onwards to 2030.
Recommendation #1 – expand provision of payroll-deducted savings schemes.
We see the workplace as a channel to reach people directly to offer them the means to save by default alongside managing their money and pensions in other ways.
We have tested various nudges to increase engagement with voluntary, opt-in models of workplace saving offered by building societies, credit unions, and fintech providers – with modest success.
More recently, we have tested “autosave” models of workplace savings, where the default is for the employer to enrol the employee into a workplace savings scheme automatically unless the employee actively chooses to opt out.
Autosave has shown dramatic increases in employee participation rates. We plan to continue testing autosave in different workplace scenarios to build on these initial, positive findings – and engaging government, providers, and employers about ways to scale provision of workplace savings, either through autosave or opt-in models. The pledge by BSA members to increase the number of workplace savers by one million by 2025 is instrumental to this.
Recommendation #2 – increasing take-up of Help to Save and our understanding of incentivised saving
The government’s reward-based Help to Save scheme is targeted at people on low income in work on the day of opening the account but who receive income top-ups through tax credits or Universal Credit.
The account, provided by NS&I, stays open for four years even if the saver’s status changes, offering a 50p in the £1 reward for each £1 saved on savings of up to £50 a month. People who are eligible can open a Help to Save account until the end of August 2023.
Once the account matures – some are already maturing – then the saver must transfer the funds to a nominated deposit or another savings account. For both new and maturing Help to Save accounts, it’s a good opportunity to keep the savings message front of mind for people who can afford to do so.
More widely, we’re interested in working with financial services to understand how we can use prize or reward-based incentives beyond interest rates to encourage savings among the working age population on low to modest incomes.
Recommendation #3 – working with financial services to create a savings charter.
To help us achieve our ambitious target to increase the number of working-age savers by two million by 2030, we plan to work with a range of financial services providers to create a savings charter.
The primary purpose of the charter is to raise the profile of savings in the retail or community-based activities of its signatories. It will provide a means for building societies, credit unions, banks, and fintech providers – either alone or in partnership – to consider the savings needs of working-age people on low to modest incomes.
In bringing together organisations dedicated to improving approaches to saving, UK Savings Week is an excellent example of how such a charter could work in practice.
To find out more about the UK Strategy for Financial Wellbeing, visit:
https://www.moneyandpensionsservice.org.uk/uk-strategy-for-financial-wellbeing/
