The Pension Commission should consider the potential role of sidecar savings in its work on adequacy, Scottish Widows market development manager, Mathew Zimmerman, has said, highlighting the potential benefits of the sidecar model for lower-income earners.

Speaking during Society of Pension Professionals (SPP) Conference session, Zimmerman argued that sidecar savings could provide a safeguard against excessive contributions that might strain day-to-day finances, while still improving overall retirement adequacy.

“At the moment, if contribution rates are increased across the board, there is a real risk that low earners could end up oversaving, which could create short-term financial pressures,” Zimmerman explained.

“If higher contribution rates were targeted solely at those on higher salaries, sidecars would be less urgent. However, if increases are applied across the entire workforce, then the role of sidecars becomes far more important.”

Zimmerman also emphasised the importance of flexibility in how sidecar products are offered.

He noted that careful consideration is needed to determine whether sidecars should be incorporated as a default feature within auto-enrolment schemes or whether they should remain an optional feature that employers and schemes can choose to implement.

“Personally, I lean towards offering sidecars as an optional feature, allowing schemes to allocate a portion of any contribution increases to fund them,” he said.

“This approach provides greater flexibility and will be a key factor in the ongoing debate around how best to support DC members across different income groups.”

Research undertaken during the session suggested that many pension professionals are optimistic about the future, revealing that 62 per cent of pension professionals expect defined contribution (DC) members to be better off in 10-20 years.

The survey revealed that the majority (62 per cent) of pension professionals anticipate that members of DC pension schemes will be financially better off within the next 10 to 20 years.

The poll in the session also showed a mix of views on the timeline of DC members being financially better off, as nearly a quarter (23 per cent) believe DC scheme members will be better off in as little as five years, while 15 per cent think members will not see better outcomes in that timeframe.

Commenting on the findings, SPP president, Sophia Singleton, said: “SPP’s industry polling suggests that there is real confidence that the government is on the right track with its various reforms - from value for money and delivering scale to targeted support and the establishment of a Pensions Commission.

“The SPP will continue collaborating with government and regulators to ensure these reforms are the best they can be, to maximise outcomes for all savers.”

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