A ‘sidecar’ account that is accrued through a similar format to workplace pensions could assist employees with saving for the long and short term, The Aspen Institute has proposed.

Speaking at the Nest Insight Beyond Longevity conference last week, Aspen Institute project director Jeremy Smith suggested a new hybrid approach to workplace pensions and savings. A sidecar account could be introduced whereby people can save into a defined contribution pension as well as a “rainy day” savings account through their auto-enrolment arrangement, he said.

The sidecar proposal aims to incorporate actual behaviour into the design of products, looking at how people actually manage their money. This would “meet a multiplicity of needs and encourage saving for the long and short term,” Smith added.

When questioned on the exact details of the account Harvard Kennedy School professor Brigitte Madrian said that savers could have the option as to how much of their income they choose to allocate to each fund.

The savings product would be “separate but integrated” and can allow members to “split the amount / percentage into two accounts each month, rather than just saving for retirement”.

“Such an innovation could help address families’ current inability to cope with financial shocks and volatility, as well as their over-reliance on withdrawals from retirement accounts to fund current consumption,” The Aspen Institute’s report on the sidecar account added.

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