The government-backed automatic savings pilot program will use open banking technology to develop affordable savings for the self-employed.
Image source: Pete Hykin, Stuart Robinson and Chris Eastwood/Penfold.
A digital retirement startup has teamed up with a research firm to pilot a program that will allow freelancers to automatically save money each month for retirement.
Penfold has launched the pilot program which it hopes will “level the playing field between independent savers and the wider working population”.
Penfold, founded in 2018, aims to help the self-employed get started on retirement in minutes, then works to educate and support customers who may not qualify for supplemental retirement plans supported by the ’employer.
It has partnered with Nest Insight to launch a pilot program to help self-employed people save for retirement.
The pilot scheme comes as figures show pension savings for the self-employed hit a record high last year, with workers contributing £830million, up from £1.15billion the previous year.
The automatic savings pilot program will use open banking technology to develop 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 look at the saver’s monthly income and expenses and encourage those with excess monthly income to save more in their pension.
Savers will have full control of their retirement pool and can increase or decrease the amount they wish to supplement their retirement each month or decide not to supplement 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 example, it will encourage the self-employed to save at certain times, such as when they receive a large payment.
If the pilot is successful, Penfold says it plans to expand the bank account connection pilot to allow savers to share more details about their finances to enable more accurate savings suggestions.
The pension provider is also considering expanding the pilot to use gross income, rather than surplus income, to calculate savings amounts.
It says this would allow the self-employed to automatically save a fixed portion of their income into their pension on a monthly basis, in the same way that those in salaried employment benefit from automatic enrollment and employer pensions.
Chris Eastwood, Co-Founder and Co-CEO of Penfold, said: “This technology will allow us to automatically calculate affordable savings tailored to each individual and allow them to have full control over their pension payments based on their own needs.
“As the nature of work changes, this level of flexibility and accessibility must be part of all future retirement products.”