The Money and Pensions Service (MaPS) estimates that 11.5 million people in the UK have less than £100 in savings, leaving them incapable of withstanding financial shocks. With many facing cost of living pressures, it is likely that the number of people who are financially stretched will increase over the next 12 months.
Payroll savings products can be a powerful way to support the financial wellbeing of employees. Indeed, half of people would like more help with saving from their employer. In this project, BIT partnered with the MaPS, Capita and the product developer, Level Financial Technology, to design and test the impact of a new payroll savings product.
Whilst offering payroll savings is a great first step, behavioural barriers (e.g., inertia, present bias) can deter people from signing up. In this project, we tested solutions to overcome these barriers. The most effective solutions included:
- Making it (seem) easy to sign up – by using an ‘soft default’ email subject line ‘we’ve set up an account for you’, we highlighted how easy it is to set up an account and start saving. The soft default email led to a 4-fold increase in people signing up to save.
- Increasing the default savings setting to encourage higher levels of savings – due to inertia, people tend to stick to pre-set settings, therefore we set the default saving amount to a level users reported to be ambitious but realistic.
- Reminding people of the impact of starting small i.e., small savings every day can add up to a lot over a year and that can cover most unexpected expenses.
- Incentivising sign-ups with a £5 sign-up bonus and entry into a £1000 prize draw. The incentive tripled sign-ups during the first two weeks after they were announced.
We also found that people who signed up for payroll savings increased their confidence in managing their money and built a regular savings habit that created an initially small (but growing) savings buffer.