Mick McAteer, founder and co-director of not-for-profit group the Financial Inclusion Centre, explains how payroll can tackle the UK savings crisis.
The economic impact of COVID-19 has created disparities in the experiences of UK households. More fortunate households saved record sums as their spending fell, but millions of others saw their incomes hit deepening the savings crisis.
With this in mind, the Financial Inclusion Centre (FIC) has published a new report on how payroll savings schemes help promote financial resilience amongst lower to medium income workers.
We found payroll savings help overcome inertia and promote positive behaviour among the lower to medium income workers studied. They were:
The research found having £1,000 in savings could protect half a million people from problem debt. Payroll scheme members were typically saving between £50 and £70 a month - this could reach that £1,000 cushion in around three years.
There is huge potential for growth of payroll savings schemes. Just 850 employers are helping 200,000 workers save through payroll. Yet, there are 5,400 employers in the UK (with workforces of at least 500 people) employing a total of 15 million.
Payroll savings is a relatively simple concept which could be scaled up, given the right support. The measures we recommend to government include:
As the economy recovers form the pandemic, we must help people become financially resilient against future shocks. Payroll savings schemes are an important part of the solution.