Autosaving is a similar concept to auto-enrolment for workplace pensions, where employees are automatically opted-in to a payroll-saving scheme so that they can build up a pot of savings. Employees have the option to opt-out of the scheme if they choose.
Opt-out autosaving has, in trials, demonstrated higher participation levels than opt-in saving schemes, giving employees a better opportunity to improve their financial resilience.
Why is having savings important?
Saving money is vital for both financial and psychological well-being. It provides a pot of money to draw on in emergencies and helps avoid using costly short-term loan services or credit cards to meet financial obligations.
In an article published on the BBC News website on 7th November 2022, it was reported that the Money and Pensions Service (‘MaPS’) found that more than a quarter of UK adults have less than £100 in savings set aside.
In the survey of 3000 people:
- 17% of those asked had no savings at all
- Another 5% had less than £50 in savings
- A further 4% had between £50 and £100 set aside for emergencies
By having savings, individuals can avoid spiralling into debt which causes problems with mental health as well as social, employment and relationship problems. Having savings builds financial security and helps independence whilst making provision for:
Emergencies – it’s almost inevitable that there will be some ‘emergencies’ in life. This might be something like a washing machine breaking down or a car needing some major work, but if they’re not budgeted for, they can be financially challenging. With a pot of savings set aside to deal with emergencies, financial and emotional stress can be reduced and the emergency can be dealt with more quickly and efficiently.
Life events – financial difficulties are one of the major causes of relationships breaking down, so planning for future life events helps meet these financial obligations and reduces the risk of breakdown of the family unit.
Financial Independence – the less savings an individual has, the more debt they potentially accrue. This leads to less financial independence. To become more financially independent, it’s important for individuals to build savings, making them less reliant on expensive borrowing such as payday loans or accessing cash through credit cards.
Later life – at the time of writing, the national state pension is £185.15 per week, which calculates to just over £9,600 per year. This full pension entitlement is dependent on having a full record of National Insurance contributions throughout the individual’s working life. State pensions are paid 4-weekly, in arrears.
The Pensions and Lifetime Savings Association carried out research on the cost to live a moderate lifestyle in retirement. This was estimated to be over £20,000 per year.
For an especially comfortable requirement, the figure was estimated to be over £33,000 per year. With the gap between the two, it’s essential to have savings to top up the pot. Savings can be money in the bank, investments, a private or workplace pension or a combination of savings provisions.
How successful is Autosaving?
A research trial was launched into the effectiveness of an opt-out, or ‘autosave’ approach to workplace emergency saving by Nest Insight in November 2021. This trial is supported by BlackRock and the Money & Pensions Service and is in collaboration with employer SUEZ recycling and recovery UK (‘SUEZ’).
The trial is assessing the effectiveness of new employees of SUEZ being automatically signed up to saving £40 per month unless they specifically opt-out of the scheme. Employees have the option to change their savings amount, stop saving at any time during the trial, make additional contributions outside of payroll as well as withdrawing any funds from their savings pot if they needed to.
New employees after November 2021 are being compared to joiners in the previous 12 months, who have the choice to opt-in to a workplace emergency savings scheme.
Initial findings after the first six months of the trial show there was an increase of around 50 percentage points in participation in workplace savings for those employees who are automatically opted-in to a savings scheme:
- 1.3% of employees participated in workplace savings for the opt-in approach
- 52.6% of employees participated in workplace savings for the opt-out approach
The results also demonstrate the difference in savings balances between the two approaches:
- The average savings balance of employees from the opt-in approach was £29.34
- The average savings balance of employees from the opt-out approach was £129.99
Early findings also indicate that implementing an opt-out approach to savings in the workplace does not affect the likelihood that employees will opt-out of workplace pension schemes.
How does PayCaptain help?
PayCaptain is an award-winning payroll solution that’s designed to help improve the financial resilience and well-being of employees.
PayCaptain is designing auto-savings functionality for employees so they are automatically opted in to a savings scheme, unless they specifically decide to cancel it. PayCaptain will automatically transfer a fixed amount into the employee’s savings account so they can start to build their savings pot. PayCaptain is currently working with Nest Insight, the Behavioural Insights Team and the Money and Pensions Service to test the optimum amounts that will encourage savings to be regularly made.
If an employee does not have a savings account, one can be set up within the PayCaptain app. This is useful for regular as well as one-off payments to boost savings and improve financial resilience for the future. Employees can monitor their savings growth, or access their savings through the PayCaptain app during periods of higher financial demand.
Implementing autosaving with PayCaptain will be more effective than other solutions as the average adoption of the PayCaptain app is almost 100% across company employees. This provides a significant opportunity and greater base than most solutions to engage the workforce and demonstrate the benefits of the new functionality.
The high rates of adoption and employee engagement through the PayCaptain app is hugely beneficial to employers who want to improve the financial well-being of their employees - as opposed to other financial well-being or benefits apps where adoption and engagement is much lower.
The PayCaptain app provides clear information to employees through graphical payslips which have adopted the Plain Numbers approach. This enables companies to support their employees who struggle with numbers by improving the way they communicate, increasing comprehension. With increased understanding, employees have the opportunity to make more informed choices about their money and improve their financial well-being.
Along with Payroll saving functionality and graphical payslips that help employees understand their finances better, PayCaptain offers a host of innovative functionality to help improve financial well-being.
- On demand pay – where companies can give their employees access to payments when they need them, even if it’s outside of the regular pay period at no cost to the employee. This prevents employees having to rely on expensive payday loans or having to use credit cards at high rates of interest to make up the shortfall in their household budget
- Payment splitting – where employees can make payments direct from their net pay to family members, landlords, loans, credit cards, etc – eliminating risk of missing an important payment
- Pension auto enrolment – automatic opt-in to workplace pensions to make provision and build better financial resilience for later life
- Money planning tool – where employees can create a personal budget
- A host of resources and information via Money Helper
In summary, ‘autosaving’ is payroll functionality that automatically opts employees in to a savings scheme, similar to auto-enrolment into workplace pensions. The employee can opt-out of the scheme if they choose. The purpose of autosaving is to allocate a specific amount of an employee’s payroll to savings to help increase their financial resilience and give them access to emergency funds when they need it.
Today 25% of people in the UK have less than £100 in savings and this percentage is likely to rise further due to the current cost-of-living crisis. More than ever before, employees need help and support managing their finances and household budgets. By implementing autosaving functionality through payroll, employers can offer their employees a simple, effective way to build up their financial resilience.
PayCaptain Payroll Solutions Limited, www.paycaptain.com is a multi award-winning HR/FinTech company that delivers a fully automated cloud outsourced payroll service. The solution contains many unique and innovative features for employees, helping them to take control of their pay and increase their financial well-being. PayCaptain is a payroll solution that helps employers pay their workforce, regardless of income and personal circumstances. The solution also incorporates functionality that's specifically designed to positively impact financial resilience for people struggling with money, or vulnerable and low-income employees.
PayCaptain is the world’s first payroll company to be B-Corporation certified. To read more about B-Corporations, visit www.bcorporation.net
PayCaptain has been recognised and rewarded with two B Corp ‘Best for the World’ awards for being within the top 5% of highest scorers within both the Workers and Governance impact areas in the B Corporation B Impact Assessment.
In October 2022, PayCaptain was awarded the Chartered Institute of Payroll Professionals' Software Product of the Year 2022 at the CIPP Annual Excellence Awards.