The “Sidecar Savings” voluntary savings program and its experience with the implementation of the pilot version of “Jars” could address two of the biggest financial challenges facing UK households, according to the latest Nest Insight report. JARS combines an emergency savings account, with no withdrawal restrictions, and a traditional pension savings account that does not allow withdrawals, an innovation that aims to improve people’s well-being by promoting the accumulation of savings, enabling them to better address their short and long-term needs. According to pilot tests conducted between July 2019 and August 2022, analyzing more than 60,000 bits of data and 72,000 survey responses, it was found that this program not only helps people generate accessible short-term savings, improving their financial resilience, but also helps them protect their future retirement savings. In particular, it was found that:

1. Sidecar-type savings are very attractive to employees who need encouragement to save.
2. Savings as a percentage of salary enable employees to save persistently.
3. Savers value the control and flexibility that Jars provides.
4. Saving as a percentage of salary helps people build a safety net, boosting their financial well-being and resilience.
5. Transferring funds between the emergency and pension accounts allows people to save more for retirement once they have accumulated some short-term savings.

Membership in the sidecar savings program is persistently low (although 46% of eligible employees think the Jars program would help them, only about 1% sign up to save in that program).  People therefore need additional encouragement to fulfil their desire and intention to save. Early data suggests that a voluntary exclusion approach to emergency saving is likely to be more effective and inclusive than an offer that requires employees to participate (the default option is to enroll in the JARS program, and one must make an active choice to opt out, as in the UK’s self-enrolment program introduced in 2012).

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Source : https://www.nestinsight.org.uk/

Date: 26.04.2013