The Government plans to conduct a number of “targeted interventions” next year to determine the best method to increase pension saving among the self-employed.
Its review into auto-enrolment published yesterday says there is ‘no single or simple and straightforward mechanism’ to bring the self-employed into auto-enrolment.
The Government notes there are nearly five million self-employed people in the UK and up to two million of them who are at risk of under saving for retirement.
This is despite the fact they would meet auto-enrolment criteria income and age criteria if they were classified as workers.
The report explains a range of solutions have been put forward as part of the review but adds the current evidence-base, including international experience, does not conclusively show how any of these approaches would work in practice.
To gather evidence and see what the best solution for the self-employed might be the report recommends the Government works with organisations that use self-employed contracted labour to understand whether or not they can help to facilitate pension saving.
Furthermore it suggests working with other organisations who act as touch points for the self-employed, such as banks, to explore how technology could assist in facilitating pension saving.
Finally the report proposes HM Revenue and Customs’s Making Tax Digital initiative be used to identify the most effective options to increase pension saving among self-employed people.
DWP will work closely with HMT and HMRC on the proposed interventions in relation to developing the necessary feasibility work that will precede testing in 2018.
Secretary of State for Work and Pensions David Gauke says: “This government has rebuilt the UK’s savings culture. For an entire generation of people, workplace pension saving is the new normal. And my mission now is to make sure the next generation of younger workers have the same opportunities.
“We are committed to enabling more people to save while they are working, so that they can enjoy greater financial security when they retire.
“We know the world of work is changing, so it is only right that pension saving does too. This ambitious package will see more people than ever before helped onto the path towards building a secure retirement.”
Reacting to the report Old Mutual head of retirement Jon Greer explains the government should keep its options open. “It makes sense to keep an open mind about creative savings solutions for the self-employed and we hope the DWP will consider a pension ‘sidecar’ which would give early access to cash if required, which could be helpful to self-employed people with volatile or insecure income.”
Royal London pensions expert Jamie Clark criticises the lack of urgency regarding the self-employed. “The Government’s ambition to maintain momentum on auto-enrolment risks being de-railed for the many millions of self-employed people for whom pension saving still remains a myth. Action is needed now to tackle the under-saving among this group,” he says.
Meanwhile work and pensions committee chairman Frank Field argues the review lacks ambition. “Auto-enrolment was a bold leap by the Government which has been hugely successful in getting millions of people to start saving in pensions.
“But this review shows none of that boldness in announcing a few minor tweaks and tentative pilot schemes.
“The analysis accompanying the report shows 12 million people are under-saving for retirement, including a growing army of the self-employed.
“It is time for the Government to revert to bold type in building on its past successes.”