Workers are more inclined to take up workplace savings schemes if they have to opt out of them, a research project has found.
A trial run by Nest Insight, a public think tank, together with financial wellbeing company Wagestream and credit union TransaveUK, looked at ways to encourage employees to start saving a portion of their wages.
In the trials, Co-operative Group and Bupa Care Services saw the take-up rate for savings go up from 16% to 71% when employees were required to opt out of saving, rather than being given the choice to opt in. The default deduction was £40 a month.
Rubbish collection company Suez saw participation rise from 1% to 47%. Ninety-six per cent of employees said they wanted the company to continue with the scheme or did not mind either way.
Savings auto-enrolment
Government-backed employee share schemes under consultation
The aim of the research, which began in November 2022, is to see whether automatically enrolling employees into workplace savings – in the same way employers do with pensions auto-enrolment – would increase participation and encourage them to build up a pot of emergency savings.
Previous research by Nest Insight has found that inertia is a key factor in employees not having enough rainy day savings. At one employer, 98% of employees who felt the workplace savings scheme would be helpful to them had not yet signed up.
Jo Phillips, Nest Insight’s director of research and innovation, told The Times: “It’s clear from our research that opt-out payroll savings approaches have enormous potential to boost the financial resilience, mental health and productivity of millions of people.
“We have a huge opportunity here. Over the coming months, we’ll be bringing together industry and policymakers to explore how opt-out payroll savings approaches could be scaled.”
Nest Insight’s findings come as the House of Lords is due to sit today (18 September) for the third reading of a bill that will reduce the age of those being auto-enrolled from 22 to 18 and remove the lower earnings limit, opening up access to a wider portion of workers.
This is the final stage the Pensions (Extension of Automatic Enrolment) Bill must pass through before gaining Royal Assent.
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association, said it would be an “important step forward” for savers if the bill is passed.
“This bill will provide the legislative footing to extend auto-enrolment so a greater number of savers will have incomes sufficient to meet their retirement goals.
“However, for savers to reach an adequate income in retirement, further increases are still needed over the next decade so that auto-enrolment rises from the 8% pension contribution today to around 12% in the early 2030s – split 50/50 between employers and employees.”
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