Work and Save Home — Action for Financial Inclusion

Workplace payroll savings schemes help financial recovery and build future financial resilience.

WORK AND SAVE – SCOTLAND

WORK AND SAVE - SCOTLAND PROGRESS REPORT

Action for Financial Inclusion CIC (AfFI) co-hosted an update on the Work and Save Scotland programme in Edinburgh on October 30 with leading credit unions, Capital and Scotwest.

Work and Save Scotland has been funded by the Scottish government and run by AfFI and Scottish credit unions, Capital and Scotwest.

The report stage event was introduced by Ben Macpherson MSP and chaired by Marlene Sheils, Capital’s ceo. Present were major employers, public bodies, civil society organisations, and charities with an interest in promoting financial inclusion and resilience.

Mick McAteer, co-director of the Financial Inclusion Centre and a director of AfFI, presented recent research on the benefits of payroll saving (see below) and outlined the success to date achieved by Work and Save Scotland and the lessons learned.

This was followed by a workshop, with all taking part sharing ideas on how to expand the take-up of payroll saving and build much needed financial resilience and inclusion in Scotland and the rest of the UK.

The experts present contributed a range of practical recommendations and policy proposals which were incorporated into a next steps paper on Work and Save Scotland published below.

DOWNLOAD THE WORK AND SAVE SCOTLAND PROGRESS REPORT HERE

Why do we need payroll saving?

The economic crisis created by Covid, and now the cost of living crisis, have highlighted how millions of households had low financial resilience and little or no savings to cushion them against economic shock.

In the UK as a whole, nine million people have no savings and a further five million have less than £100. Fourteen million adults (one adult in four) don’t even have £100 at hand to cope with financial shocks. (affi.org.uk)

Millions of adults would not last long without having to borrow or ask for help if they lost their main source of income. Twenty one percent of adults in Great Britain surveyed by the Financial Conduct Authority (FCA) in 2022 said they could last less than one month before having to borrow, up two percent on 2020. Twenty four percent of Scottish adults said the same, up five percent from 2020.[1]

The household savings ratio in Scotland in 2021 (the latest available full year data) was 11.3 percent compared to 12.4 percent in the UK.[2] Looking at the past two years of quarterly data (up to the third quarter of 2022) shows that the Scottish savings ratio has on average been around one percent lower than the UK ratio.[3]

The UK failed to help households build financial resilience in the aftermath of the last great financial crisis in 2008. Now, as the economy recovers from Covid, and households are faced with navigating the cost of living crisis, the UK should heed that lesson.

Payroll saving schemes have a major role to play in helping households build resilience. Recent research, carried out by the independent non-profit Financial Inclusion Centre and supported by the Money and Pensions Service, has shown that workplace payroll savings schemes provided by credit unions can yield benefits both for low and medium income workers and for their employers.

That report can be found here: Getting Workforces Savings-Payroll Savings with Credit Unions | The Financial Inclusion Centre.

With payroll saving, small amounts are deducted from salary at source and then transferred to a credit union or other savings institution. A simple process like this makes it easy for employees to build a savings cushion.

This can reduce the need to borrow and ease money worries which contribute to stress and affect workplace productivity. Payroll saving is a great way of supporting local economies and community financial institutions like credit unions.

*The saving ratio captures the income households have available to save as a proportion of their total available resources.

[1] Financial Lives 2022 survey: insights on vulnerability and financial resilience relevant to the rising cost of living | FCA fls-2022-early-selected-data-tables-vulnerability-financial-resilience, Table 1, Fig 9

[2] Seasonally adjusted figures. The official savings ratio includes an adjustment for pension holdings. Stripping out this adjustment, the savings ratio for the UK was 8.8 percent and 7.4 percent for Scotland.

[3] AfFI analysis of Scottish Government GDP Quarterly National Accounts - Supplementary Tables, Table 15: Household Sector Allocation and Distribution of Income Accounts and ONS Quarterly Sector Accounts 2022 Q3 Worksheet HH_3: Households sector (S.14): Use of disposable income account (II.4.1): Based on the measure excluding pension adjustments. Seasonally adjusted

Work and Save – Scotland is an important initiative to raise awareness of payroll saving among Scottish employers and workers.

It’s part of a range of initiatives designed to help people build financial resilience.

Work and Save - Scotland makes it easy for employees to save more. It supports responsible employers who want to help their workforce build financial resilience and suffer less stress.

Work and Save – Scotland is supported by funding received through the Scottish Government’s Scottish Community Lenders Fund, managed by Social Investment Scotland (SIS).

Thanks to this funding, the new charitable community interest company Action for Financial Inclusion (AfFI) has partnered with two of Scotland’s leading credit unions, Capital in Edinburgh and Scotwest in the west of Scotland, to provide a free service to employers and their workers.

These two established credit unions have successfully operated payroll saving for some years in Scotland and are among the most successful in the UK.

Work and Save – Scotland has begun including other Scottish credit unions in the payroll saving scheme, providing employers and employees greater choice. The Work and Save – Scotland partnership offers employers a free service in getting workers connected to the right payroll saving arrangements.

The credit union partners who operate the payroll savings schemes can provide expert on-site help to communicate the benefits of workplace savings to employees and guidance on how to do it.

Evidence proves the free on-site assistance works so well that staff see it as a workplace benefit. It is particularly effective with recruits.

The employer’s only contribution is the minimal admin needed. It is no more difficult than deducting pension contributions.

Everything else is handled by the Work and Save – Scotland payroll saving providers.

We are pleased to have the support of Social Investment Scotland (SIS), North Lanarkshire Council, Scottish Enterprise and the Scottish Cabinet Secretary of Social Justice, Housing and Local Government, Shona Robison MSP, who said:

“The Work and Save programme, funded by our Scottish Community Lenders Fund, is helping people to create a valuable financial buffer by developing workplace savings schemes. Putting a small amount of money aside on payday can make it easier for people to prepare for unexpected costs.”

Scottish Enterprise said:

“We are delighted to offer staff the opportunity to regularly save with our credit union partners through a simple process of payroll deductions. We recognise the value of memberships with credit unions that are not-for-profit, member owned financial co-operatives providing savings plans, lending facilities, current accounts, mortgages and insurance services. We are pleased to promote these benefits to our staff as part of our financial wellbeing focus.”

What is Work and Save - Scotland?

How we do it

The leading credit unions that partner with Work and Save - Scotland provide payroll saving to over a hundred organisations across the central belt of Scotland.

Now employers across Scotland are entitled to support in setting up and implementing payroll saving under the Work and Save - Scotland banner.

There are no qualification criteria in terms of workforce size or whether you are a public or private sector organisation.

Meanwhile, your staff get the welcome workplace benefit of having less to worry about at month end.

All employers have to do

Call the number provided or email mentioning Work and Save – Scotland for more information or for help to begin the onboarding process. Should you request our on-site information service, we will schedule a visit to your workplace to speak to managers, union reps and employees about the many ways Work and Save - Scotland can support your organisation.

Our message to your employees

Once your organisation has signed up as a partner, should you wish to participate in the payroll saving scheme, you will be asked to select a savings amount and the credit union that will hold your savings. Your HR or finance team will deduct the amount you’ve chosen to save and forward it to the credit union you select each payday.

Employers won’t be privy to the details or the contents of your savings account, they only process the deduction automatically every payday.

You can change the amount you want to save at any time. Credit unions don’t charge for changes or amendments.

Credit unions offer many other benefits such as free life savings protection, matching your savings in the event of your death.

Capital and Scotwest each have unique members’ benefits like community awards to local projects you nominate, a members’ lottery and a pledge to plant a tree if you later take out a green loan for solar panels through the Trees for Life conservation scheme.

Credit unions are not-for-profit. Their surpluses help keep products low cost and may pay a dividend on your savings, which can be a pleasant surprise when interest rates are low.

Payroll saving schemes help credit unions to work on a larger scale. The larger they are, the more they can lend to members in a time of need.

The Money and Pensions Service, which the government set up as an impartial provider of money and pensions guidance, sets out the benefits of payroll saving:

1. Attract and retain employees

There is promising evidence emerging on the impact and appeal of payroll savings. In 2015 the Chartered Institute of Payroll Professionals showed that 55% of employees aged 16-65 would like their employer to offer payroll saving.

Two 2020 surveys showed 72% of employees want access to payroll saving. Ninety-two per cent of employers would implement a scheme.

2. Productivity

Research indicates eight in ten UK employees take their money worries to work, affecting their performance. Minimise financial stress and improve productivity by providing this automatic service. (Close Brothers, The Financial Wellbeing Index, 2019).

3. Support available to employers

Financial product providers that work with employers to offer payroll-deducted savings, loans and salary advance schemes range from credit unions to fintech providers.

While the Money and Pensions Service cannot choose a provider for you, we can provide information on available product choices.

Financial education and guidance on money management are important to help employees decide if payroll-deducted saving meets their needs. Payroll saving should not be presented as a substitute for contributions to a workplace pension, nor should people participate in a scheme without considering their debt commitments.