One third of self-employed trial Nest members have ‘zero pots’

One third of self-employed trial Nest members have ‘zero pots’

Around a third of self-employed Nest members in a Nest Insight savings trial have never made a contribution to their pension pot.

There were around 4.2mn people in a form of self-employment in the first quarter of 2022, with just 18 per cent of them saving for retirement, Nest’s research arm said.

This was markedly lower than the 88 per cent of the working population that is eligible for automatic enrolment with their employer.

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There are similar interest levels in pensions between those in full-time employment and the self-employed, with 77 per cent and 75 per cent of each group, respectively, believing in the importance of saving for retirement.

“However, structural and contextual barriers, including often variable and uncertain incomes, make it more difficult for some self-employed people to get started with retirement saving and commit to saving regularly,” Nest Insight said.

The research company received around 6,000 responses to its survey, as part of an assessment of whether emails to self-employed Nest scheme members – which encouraged them to weigh up making a pension contribution – were more engaging at particular moments in the tax year. 

Thirty-one per cent of self-employed Nest members have never made a contribution to their pot, which are known as “zero pots”. More self-employed men than women have zero pots.

Around 40 per cent of the survey sample, meanwhile, were considered “ad hoc contributors”, while around two-thirds had at some point held regular direct debit mandates for contributing towards a Nest pension.

The trial found that “open rates” on emails were around the same throughout the year, while “click rates” were lower in the period before the end of the tax year.

Nest Insight collaborated with Penfold on a savings mechanism trial, which tested two flexible savings mechanisms that helped users to save a percentage of excess monthly income, or prompted users to save when it might be more affordable.

It found that savers who had active accounts, especially those making regular direct debit contributions, were more likely to sign up to flexible saving solutions. “It was more difficult to engage those not already saving,” the analysis found.

Nest Insight also worked with Moneyhub for a trial on “smart nudges”, which assessed the effectiveness of nudges that encouraged users to save any positive difference between their income and expenditure in a month. It also explored retirement planning nudges that prompted them to look at information about saving for their future.

The trial learned that response rates to nudges were similar between self-employed people and the employed workers in its sample.

“The findings are promising and demonstrate that prompts, nudges and more flexible saving approaches can successfully boost engagement,” said Nest Insight research and innovation director Jo Phillips. 

“But we know that converting engagement to action is a significant challenge when it comes to pension saving,” she continued.

“These trials show how we can nudge the dial within the current regulatory framework, but if we want to dramatically increase retirement saving levels among self-employed people in the near future, more substantive action and systemic, policy-based intervention will likely be required.”