By John Reynolds on Thursday 16 December 2021
The auto-save pilot scheme, supported by the government, will use open banking technology to work out affordable savings for the self-employed.
A digital pension startup has teamed up with a research firm to pilot a scheme, which will allow freelancers to automatically save money each month towards their retirement.
Penfold has launched the pilot scheme which it hopes will “level the playing field between self-employed savers and the wider working population”.
Penfold, founded in 2018, is focused on helping self-employed workers start a pension in just a few minutes, and then works around educating and supporting customers who might not have additional employer-supported pension schemes.
It has partnered with Nest Insight to launch a pilot scheme to help self-employed people save for retirement.
The pilot scheme comes as figures show that self-employed pension savings hit a record low last year, with workers contributing £830m, down from £1.15bn the previous year.
The auto-save pilot scheme will use open banking technology to work out affordable savings for self-employed customers.
Customers will be able to connect their bank account to Penfold and select a percentage of their excess income to save.
Penfold will then scrutinise the saver’s monthly income and expenses and nudge those with excess monthly income to save more into their pension.
Savers will have full control of their pension pot and can increase or decrease the amount they want to top-up their pension each month or decide not to top up at all.
The pilot, which is supported by the Department for Work and Pensions (DWP), will test different forms of flexible savings solutions and nudges.
For instance, it will urge the self-employed workers to save at certain times, such as when they receive a large payment.
If the pilot is successful, Penfold says it plans to extend the pilot connecting one bank account to allowing savers to share more details of their finances to enable more accurate saving suggestions.
The pension provider is also considering expanding the pilot to use gross income, rather than excess income, to calculate savings amounts.
It says this would allow self-employed people to automatically save a fixed portion of their income in their pension on a monthly basis, similar to how those with salaried jobs benefit from auto-enrolment and workplace pensions.
Chris Eastwood, co-founder and Co-CEO of Penfold, said:” This technology will allow us to automatically calculate affordable savings that are tailored to each individual and will allow them to have complete control over their pension payments to suit their own needs.
“With the nature of work changing, this level of flexibility and accessibility needs to be part of all future pensions products.”