December 2018 newsletter: The launch of NEST Insight’s sidecar savings trial

You may have seen in the news that we recently launched our sidecar savings trial. On Monday 12 November, after two years of careful planning and in-depth research to lay the foundations, we announced the details of our research pilot at an event kindly hosted by J.P. Morgan. The evening was opened by Huw Williams from J.P. Morgan, and there were speeches by NEST Corporation Trustee Member Caroline Rookes, Guy Opperman MP, Minister for Pensions and Financial Inclusion, and Professor Brigitte Madrian from Harvard Kennedy School.

This research project will explore whether the sidecar savings model can improve workers’ financial resilience today and in retirement by helping them build up some emergency savings whilst also saving more for the future. Workers participating in the trial will be monitored for two years to assess sign-up rates, how much they save, and the impact on their financial wellbeing.

Our trial is due to go live within workplaces over the coming months, and workers will begin to make contributions towards the start of 2019. We’re delighted that Timpson will be the first employer to roll the trial out within their organisation of over 5,600 workers.

At the event, we also revealed which organisations will be working with us over the next two years. And again, we’d like to express our thanks to JPMorgan Chase Foundation and the Money Advice Service (MAS) who will be providing support for the trial. MAS will also be working directly with us on the research, along with Professor Brigitte Madrian and the Harvard Kennedy School. We’re also excited to be working with Salary Finance, who will provide the emergency savings account which will work alongside a NEST pension pot.

How does the sidecar savings model work?

In a sidecar structure, contributions over and above the auto enrolment minimum would be managed through a mechanism designed to create an optimal level of liquid savings, while also maximising long-term savings. This would be administered as follows:

  1. To start with, contributions paid into the combined account structure would at first be distributed between the emergency savings account and the pension pot. The worker’s normal pension contributions will carry on going into their pension pot as usual, and the extra amount they’ve contributed will go into the emergency account.
  2. When the balance in the emergency savings account reaches a predetermined threshold level, known as the ‘savings cap’, additional contributions will start rolling into the pension pot. So at this point, the worker will be putting more money aside for their retirement.
  3. If at any point the saver withdraws money from the emergency savings account, and so reduces the balance to a level below the savings cap, future contributions will once again start being divided between the emergency savings account and the pension pot, in the same way as before.

Watch our animation to find out more about the issues we’re looking to address, and see how the sidecar model will work.

Further reading

If you’d like to learn about the more detailed workings of the trial, please read our blog ‘How will NEST Insight’s sidecar savings trial work?’ and take a look at our research reports:

Liquidity and sidecar savings discussion paper (PDF)
Liquidity and retirement savings: what’s the right balance (PDF).

We’ve also published a number of blogs on the topic:

Employees want help from their employers to save for a rainy day
Designing emergency savings accounts that individuals want to use 
Liquidity and retirement savings: what’s the right balance? 
A hybrid approach to financial security