Under a pilot program, some Uber drivers can now open retirement accounts via the ride-sharing app without a mandatory initial account balance. A robo-advisor will assist drivers through the entire set-up process, the company said.
The savings accounts will be free in the first year and require a 0.25 percent of the account balance the next years. Uber Technologies announced this week that the new feature will benefit “tens of thousands” of drivers across New Jersey, in Chicago, Boston and Seattle.
The taxi-app service also said that it has struck a deal with New York based online-investment firm Betterment for a nationwide expansion. Betterment also helped Uber develop the new feature and robo-assistant.
The two companies announced that their partnership involved no “monetary resources.” A spokesperson for the automated investor company noted that the two partners exchanged no money under the new deal.
It is worth noting that Uber drivers cannot benefit from 401 (k) plans, paid leave, and workers’ compensation. This is because the company has repeatedly declined to grant them employee status. Instead, Uber drivers work as contractors and they have to bear all the expenses.
Additionally, they need to take care of their retirement plans on their own. This is where Uber tries to lend a helping hand. The San-Francisco-based company said that the new app will enable contractors “take control of their financial future.”
Analysts noted that the program is a good “first step” to secure drivers’ future, but more needs to be done. Experts believe that the new program could become a flop, because of the way it was designed. For example, drivers must contribute to the pension funds from their already low earnings.
Fortunately, the company will not take into account driver contributions when it establishes the fees.
Uber’s rival Lyft has made a similar move in November. Under the Honest Dollar program, Lyft drivers can supply their retirement savings accounts for just $3 per month.
Analysts, however, agree that such programs are beneficial, but they suffer extreme limitations from the contractor business model. Experts called for more efforts towards raising companies’ contributions to their contractors’ IRAs.
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