A group of Conservative party members have called on the government to introduce a sidecar savings mechanism into the existing auto-enrolment policy.
The proposal was announced yesterday (April 19) by the One Nation Caucus, led by Damian Green MP, and the Tory Reform Group as one of a series of measures to bring the “country back together and deliver a recovery that serves those most hurt by the pandemic”.
In ‘One nation pathway to recovery’, the Tory members suggested that the government should consult on introducing a new sidecar savings mechanism within auto-enrolment to encourage employees to build up emergency savings.
The report mentioned the pilot initiative conducted by Nest Insight, which “has shown both employers and employees are attracted to the idea of a payroll deduction emergency savings tool.
“The government should consult on introducing such a mechanism nationally and consider building it into the existing pension auto-enrolment policy,” the document stated.
In December, businesses trialed Nest Insight’s sidecar savings project, which it said could provide a boost to financial wellbeing.
Now known as Jars and being tested with staff at BT, StepChange, the University of Glasgow and Timpson, the sidecar savings model sees savers split contributions between a Nest pension and an emergency liquid savings pot.
After signing up to Jars, employees set a rate of contributions and a saving target. When the money is deducted from their pay, contributions above their auto-enrolment payments are diverted into interest-bearing savings accounts labelled for emergency savings.
Once the emergency pot is full, the entirety of contributions goes towards retirement savings, but if the pot is drained the split begins again.
A research paper asking employer representatives for their feedback on the trial revealed positive impressions.
Companies involved supported the broad concept of Jars, primarily as a way of shoring up short-term financial health with added pension contributions as a secondary benefit.
Rolhat Zen-Aloush is a reporter at FTAdviser's sister publication Pensions Expert