Case Study: Hybrid Workplace Savings

Today, Nest Insight has published a second briefing paper sharing early learnings from their sidecar savings trial. This new report focuses on how employers have responded to the idea of the savings approach, as well as insights into the experience of workplaces that are participating in the trial.

Nest Insight’s multi-year trial aims to test the effectiveness and impact of a hybrid workplace savings tool called Jars, which is being provided by Salary Finance. Jars is designed to help people build up emergency savings and, once a savings target has been reached, to put more aside for retirement on top of their normal auto enrolment pension contributions.

Employers play a key role by offering the tool as an employment benefit, building employee engagement and setting up employees’ emergency savings via payroll deduction. The paper shares 11 learnings, drawing upon insights from 18 qualitative research interviews conducted by independent researchers from BritainThinks between July and September 2020:

Support for the idea and product design is high

Employers like the concept of a hybrid workplace savings tool due to its perceived ability to improve financial wellbeing and build resilience among a wide range of employees. There’s widespread recognition that many people find saving difficult, and there’s a strong sense among employers that the salary deduction mechanism used by Jars could be a very effective way to initiate a savings habit:

1. It removes a temptation to spend disposable income because the employee will never see the savings contribution in their current account.
2. It reduces the time and effort required to choose and set up a savings account.
3. It establishes an ‘unconscious’ persistent saving habit.

One employer told us: “I really think it can [help people save]. My colleagues might be fed up with me saying this, but ease of access is much underestimated. If colleagues can quickly enrol, tick a couple of boxes and then it comes straight out of payroll, it’s done… there’s a lot to be said for that. You could go and open a savings account, set up direct debit, but that involves quite a bit of effort. That ease of access adds real value.” Another commented, “The thing is, it’s out of the wages before they get paid. That’s a fabulous way of doing things because you forget you’re even doing it.”

A focus on emergency savings 

Employers mainly view Jars as a way to support employees to save and build up an emergency savings buffer. The retirement saving pre-commitment mechanism, designed to help people save more into their pension, is seen as an important but secondary benefit. This is because, whilst they recognise that most people in the UK are not saving enough for their retirement, they feel that auto enrolment already goes some way to support longer-term savings and a larger gap remains in helping people build up short-term savings.

In the current environment, employers are perhaps more aware than ever of the financial vulnerability of many of their employees and the impact this can have on a person’s mental health and productivity. Indeed, a number of employers said they’re aware that some employees are struggling to pay back debts or worried about how to pay their day-to-day bills.

One employer commented, “We wanted to introduce something around financial wellbeing. This is because of research, it’s all there – there’s a huge population that don’t have any savings at all. That’s bad for both the employee and ourselves. People with no money are worried. What if we had a reliable employee and now they’re unreliable and have absence issues because of money? Any wellbeing is important to us, and mental and physical health are stresses.”

Implementation is no more complex than other benefits, but concerns voiced about power of inertia

Employers found Jars to be no more complicated to set up than other new benefits. Sharing their experience, one employer said, “Jars was very easy to set up, as all the technology and most of the administration is provided by Salary Finance. No special training was needed. Payroll staff just need to process the file provided by Salary Finance each month and make the necessary payment.”

The bigger challenge so far has been in building awareness and engagement among employees. Unlike auto enrolment, where the default is ‘saving’ and employees must actively opt out, with Jars and similar sidecar savings models, employees currently need to actively sign up themselves. Despite the personal and social desirability of saving, many people don’t get around to saving due to inertia.

Employers also recognise that affordability is a barrier to saving. They felt that some of their employees genuinely do not have extra money to save each month, particularly if they also have debts to pay off first.

Jo Phillips, Director of Research and Innovation, said:

“The interest and appetite shown by employers for sidecar savings has been brilliant to see. Without these pioneering workplaces our trial would not be possible, so we’re grateful to BT, StepChange, The University of Glasgow and Timpson for joining us on the journey and continuing with the research trial through this challenging year.

“The pandemic has created an uncertain and difficult backdrop for rolling out new benefits to employees, given the many other issues that employers are trying to manage and address at this time. But it has also brought employee financial wellbeing to the forefront of most employers’ thinking and made the idea of saving for the future much more salient to most employees.

“We believe that now more than ever the case for helping employees to build up short- and longer-term financial resilience is clear. We hope these early learnings from our trial provide valuable insights for policymakers in the UK and beyond, as well as to providers, employers and employee benefits consultants who are working on solutions to support people to build financial resilience.”

Will Sandbrook, Executive Director of Nest Insight, comments:

“These early insights show encouraging signs and give us valuable learnings and questions to explore during the remainder of the sidecar savings trial.

“As we highlighted in our first briefing paper, one of the key challenges is employee engagement. Even when employees say they want to save, and welcome the availability of Jars, many don’t get around to signing up. It’s a challenge we see across many areas of the pensions industry – how do you help employees overcome inertia? This research shows that this is clearly something employers are thinking about in the context of workplace emergency savings. In our future research, we’re planning to explore whether financial incentives and alternative joining mechanisms, such as automatic or active choice enrolment, are effective ways to address this.

“A further barrier to saving is affordability. Employers felt that for some employees, for example, the priority will be to pay off debts before they turn to saving. It’s clear employers want to help their employees with emergency saving, and so we look forward to working with them through the remainder of our research programme to explore how these barriers can be overcome.”