The Association of Consulting Actuaries and the Resolution Foundation are just two of many who have backed the idea. Savings sidecars work, as Nest Insight pilots show.
AE short-term savings sidecars for all
Suez, a recycling specialist with 6,500 employees in the UK and 40,000 worldwide has already used an AE savings sidecar for just over two and half years, achieving outstanding results.
About 65 per cent of Suez’s labour force are manual workers, the other 35 per cent are support workers and lab workers on relatively low wages, including some who have never saved before.
Using opt outs rather than opting in workers was transformational; 53 per cent of Suez employees started savings on an opt out basis compared to just 1 per cent using opt in.
Their auto-savers have an average balance of around £130 in savings after four months, compared with an average balance of around £29 by opt-in savers.
Nest Insight has already carried out several trials of sidecar savings and opt-out emergency savings via payroll, conducted with the support of big financial hitters BlackRock, the Money and Pensions Service and the JPMorgan Chase Foundation.
There is proof the opt-out savings concept works. Why wait any longer?
As with Nest’s pilot, the concept uses existing AE payroll functionality. The sidecar in essence is just a new class of pension contribution.
Adopted more widely, a mandated 2 per cent savings sidecar as part a higher 12 per cent AE rate would dramatically improve pension prospects and give savers more resilience.
People on the breadline could even just dip in their savings pot occasionally to have a jolly holiday or Christmas, free from debt. What’s not to like?
Stephanie Hawthorne is a freelance journalist and former editor of Pensions World
