REWARD
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Payroll and pensions: the frontier for supporting employees’ financial well-being
Emma Stockdale, workplace savings research lead, Nest Insight, discusses how payroll can encourage people to save for a rainy day and for their futures, also providing details of the Nest Insight trial, exploring sidecar savings
T wo of the biggest financial challenges facing low-to-moderate income households in the UK are: l not having a liquid savings buffer to cope with a financial shock today l not saving enough to achieve a liveable, dignified retirement tomorrow. While the concern isn’t new, the recent pandemic and cost-of-living crisis has shone a light on the impact a lack of financial resilience can have on those vulnerable to financial shock and without financial security. More than a quarter (27%) of employees say that money worries affect their ability to do their job, rising to six in ten (63%) among those with signs of lower financial resilience. As the financial gateway between employers and their employees, payroll has always played an important role in supporting employees’ financial well-being. Pay is, of course, an important part of the equation but it’s not the only thing that contributes to employees’ financial well- being. More employers are acknowledging the value of payroll in offering benefits and
Sidecar saving: supporting employees to build their financial resilience The solution, called Jars, is offered by Salary Finance (with accessible accounts provided by Yorkshire Building Society) and piloted in five large, and varied, UK employers: l BT l ITV l StepChange l Timpson l the University of Glasgow. Employees sign up to save via payroll, setting an amount to save each pay period and a savings target which, when reached, causes future contributions to roll into their pension as additional voluntary contributions. The account is instant access, making withdrawals quick and simple, and employees can change their level of saving and target at any time, as well as making additional contributions outside of payroll. If their balance drops below their saving target, future payroll saving contributions go
tools like savings, loans, flexible pay and insurance products among other things, on top of their traditional remuneration packages. Over the past five years, Nest Insight, a public-benefit research and innovation centre, has been exploring some of the different ways payroll can support financial and mental well-being, including through the use of hybrid saving models which combine two or more consumer financial products together. Several such models exist. In the US, Abbott offers a scheme that combines student loan repayments and retirement saving. However, in the UK, the credit union model commonly requires members to save while paying off a loan. In the first trial of its kind, Nest Insight explored whether providing employees access to an accessible ‘emergency’ savings account that’s combined with their existing workplace pension scheme would make it simpler for them to find the optimal balance between liquid and illiquid savings and improve their financial resilience and well-being.
| Professional in Payroll, Pensions and Reward | June 2023 | Issue 91 42
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