The government-backed workplace pension scheme National Employment Savings Trust (Nest) will need between 2,000 to 3,000 workers to test a new savings model, called Sidecar.
Nest Insight, the provider’s research unit, will soon be running workshops with employers to explain the project to them, and find volunteers among their workers to participate in the new project.
With the introduction of auto-enrolment in 2012, the number of individuals saving into a defined contribution (DC) pension scheme has increased. However, the pension system is illiquid, and savers cannot have an early access to their pots.
Nest’s project, based on research from the Harvard Kennedy School in the US, builds on the success of auto-enrolment by additionally introducing an optimised level of liquid savings.
This trial will split pension contributions between a standard Nest pension pot, and an external bank account or liquid fund for emergency spending.
Once the level of emergency savings reaches a satisfactory threshold, all contributions will start rolling the pension pot.
If at any point the saver withdraws funds from the liquid account, and goes below the savings cap, future contributions will start again being divided between the liquid and illiquid accounts.
Will Sandbrook, Nest Insight’s executive director, told FTAdviser that the project is currently in the designer building phase, and that he expects to start signing in individuals to the trial next April, with the aim of receiving their first savings contributions in the summer.
He predicted that there five to six medium large and quite large employers will need to be involved in the project, but the take up by the staff will be voluntary.
He said: “Emergency liquidity is a problem when saving into a pension.
“The model has the potential to improve the financial wellbeing of many Nest members, and other DC savers, who are on lower and moderate incomes.”
Mr Sandbrook added that Nest is open to include other pension providers in the trial, especially if some of the participating employers in the project are using another auto-enrolment scheme.
There are now more than nine million people auto-enrolled in a workplace pension scheme, with one million employers having fulfilled their legal duties of enrolling their staff in these plans.
From April, the auto-enrolment minimum total contribution – now at 2 per cent - will increase to 5 per cent, with the employee paying 3 per cent.
One year later, it will increase again to 8 per cent, with the worker paying 5 per cent.
A total of £17bn a year will be going into workplace pensions by 2019 to 2020 because of auto-enrolment.
maria.espadinha@ft.com
