Workplace emergency savings

Many low and moderate income savers in the UK are now building up meaningful retirement savings through auto enrolment, but a significant proportion of these workers have little or no money put aside for today’s emergencies. When a high or unexpected cost occurs, people without accessible savings may find themselves left with little choice but to seek money from elsewhere. This may include turning to friends and family, using existing credit cards, or reducing spending wherever possible. But some people might have to cancel pension contributions to free up cash or resort to high cost sources of borrowing which, if not managed carefully, can lead to debt spirals. If money worries are persistent, financial pressures can cause excessive levels of stress which may have a knock-on effect on an individual’s health, productivity at work and earning capacity.

Concern about low levels of short-term financial resilience is not new. It surfaces in a broad range of discussions; from those around problem debt, to mental wellbeing and productivity, right through to retirement security. The Covid-19 pandemic has exacerbated that concern and reinforced the importance of having an easily accessible financial buffer to help protect against any potential emergencies that come our way.

At Nest Insight, we believe in building on existing evidence bases and testing practical solutions. Our interest in sidecar savings, and emergency savings more broadly, stems from the powerful logic that can be found in evidence and research here in the UK and abroad, and are the premises underpinning our workplace emergency saving research programme:

  1. Having a small financial buffer of ‘emergency savings’ is linked to a number of other positive financial behaviours and characteristics. It’s a key part of the foundation for overall financial resilience and wellbeing, as well as acting as a platform for people to be able to save adequately for their retirement.
  2. Many millions of people in the UK do not have savings of this type and would welcome help and support to change this.
  3. The workplace has proven to be an excellent context in which to address adjacent challenges such as saving for retirement. In particular, ‘set and forget’ payroll deductions have proved highly effective in stimulating savings. This is viewed by both workers and employers as a promising route for increasing emergency savings.

Our research programmes

Sidecar savings trial

Since 2019, we’ve been working with employers and delivery partners to test the effectiveness and impact of a hybrid workplace savings tool called Jars which combines short- and long-term savings goals.

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Opt-out payroll savings trial

We’ll be launching a new workplace trial later this year to test whether an opt-out joining mechanism could enable many more people who want to save through payroll for the shorter-term to get started.

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A landscape review of existing evidence

In July 2021, we published a supplementary paper that brings together the broader evidence base around workplace emergency saving, and highlights areas where further research is needed.

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