Monzo and Inclusive Money examine pension saving for sole traders

The Centre for Inclusive Money and Monzo have formed a collaboration to study how banks could help self-employed people save for retirement, focusing on a group with materially lower pension participation than employees. According to figures cited by the organisations, 17% of the UK’s 4.4 million self-employed people pay into a pension, compared with almost 90% of eligible employees.

The project will combine seven years of research by the Centre for Inclusive Money with Monzo’s experience serving hundreds of thousands of sole traders through Monzo Business. Its central question is whether bank product design can make long-term saving easier for sole traders without removing control from customers whose income may be variable.

A recent report by the UK Pensions Commission described pension saving among the self-employed as “one of the most urgent challenges for the UK pensions system.” The gap matters for policymakers because automatic enrolment has lifted participation among employees, while many self-employed workers sit outside the employer-based pension mechanisms that support payroll saving.

Default saving, with customer choice

The Centre for Inclusive Money said its latest research provides early evidence that default savings models may help address the shortfall. In broad terms, a default model makes saving the preset route in a product or service, while allowing people to opt out, adjust the amount or pause where needed.

That structure is intended to reduce the friction of making repeated saving decisions. For sole traders, the challenge is balancing automation with cash-flow uncertainty, since income and tax obligations can vary across the year.

Monzo will bring experience from features that use behavioural prompts and automated account structures to help retail and small-business customers separate money for specific goals. The bank said Monzo Business customers put aside £450 million last year through automated Tax Pots, a feature designed to help users reserve money for future tax bills.

The collaboration will assess whether similar design principles can be applied to retirement saving. The organisations have not announced a pension product, launch date or participation targets.

Focus on practical banking tools

For banks and fintech firms, the work points to a broader role in financial resilience beyond current accounts and payments. A bank that already sees income flows and business expenses may be able to prompt saving at moments when customers have surplus cash, though any pension approach would need to preserve customer choice and comply with relevant rules.

Ruth Persian, associate director of research and innovation at the Centre for Inclusive Money, said Monzo’s product design experience would help move the centre’s research “from promising ideas to real-world solutions for real customers.” She said the organisations aim to find approaches that support self-employed people in becoming more financially secure.

The project adds to a policy debate over how to extend retirement saving habits to workers outside traditional employment. The immediate focus is exploratory: testing whether behavioural design used in everyday banking can reduce the practical barriers that have left many sole traders without pension contributions.

This story draws on original reporting from Finextra Research.