View more on these topics

Govt pension plans for self-employed face tax setback

All but the highest earning self-employed workers are turning their backs on pensions according to new figures published today by HM Revenue and Customs.

The figures contained in HMRC’s latest personal pension statistics bulletin flags up the challenge the government faces to boost pension saving among the self-employed.

In December 2017, the government published its review into auto-enrolment saying it planned to conduct targeted interventions to work out the best method to increase saving among the self-employed.

It followed this up a year later with a report setting out plans for carrying out these trials.

But the HMRC figures published today hint at the scale of the task, as they show both contributions to pensions and the cost of making them.

Hargreaves Lansdown has compared the two to give the effective rate of tax relief granted for contributions into self-employed pensions.

Among the self-employed, it points out the effective tax relief granted in 2016/17 was 40 per cent, suggesting there are few basic rate tax payers taking advantage of saving for retirement.

Furthermore, the self-employed contribution figure for 2017/18 is absent from the latest release.

Hargreaves Lansdown senior analyst Nathan Long says: “Delve deeper and there are clues that all but the highest earning self-employed workers are turning their backs on pensions.

“It’s a reminder that a lot rests on the government’s work where they’re testing nudges to boost saving among the self-employed. If this proves ineffective a more radical shake up to the incentives will be required.

“The amount the self-employed contributed in 2017/18 is unusually absent from the latest numbers.”


Graham Bentley: The unlikely key factor in picking a discretionary fund manager

Establishing the approach to qualitative versus quantitative analysis should top the due diligence list As more advisers outsource investment decisions to discretionary fund managers, the more the regulator will scrutinise the selection process. I would not be surprised if DFMs were selected on a lazy combination of brand, price and performance, yet any being offered […]


Tony Mudd: Advisers are stifling protection innovation

The biggest reason new concepts are not being brought to market is a lack of confidence that advisers will change their behaviour. Having started life in the financial services industry as a clerk for one of the largest life assurance companies in the UK, protection has always been my first love. Unfortunately, it only takes […]


Profile: ‘Someone booed me when I said I was a financial adviser’

Grosvenor Consultancy IFA Alice Douglass on the highs and lows of networking as a financial adviser Traffic wardens, tax inspectors, estate agents and journalists – all people doing jobs that the general public love to hate. But what is it about being a financial adviser that provokes such strong negative reactions from some people too? […]

Retirement - thumbnail

(Another) downhill stroll — retirement planning

A report published this morning by the CIPD (CIPD Employee Outlook March 2015) provides yet more interesting data to the changing landscape of retirement planning. It should be remembered that we are in a period of genuine flux here given that the default retirement age was scrapped three years ago, and new pension freedoms come online in April. Both of these alterations will have a huge impact on how employees plan for their retirement.


News and expert analysis straight to your inbox

Sign up


There are 4 comments at the moment, we would love to hear your opinion too.

  1. The question is answered in the text. 40% taxpayers contribute because they can immediately see the further tax relief. If one was to revert to the old system (Not CRAP – Contributions Relief At payment), but immediate tax relief to be knocked off the liability. EG £1,000 contribution with £200 knocked off the tax bill.

    Yes I know that the current system means a net contribution of £800 which is grossed up. But it is the psychology. Everyone hates paying tax and if it can be seen to be reduced it is an incentive. I wonder how basic rate self employed contributions looked 20 years ago?

  2. Paul Johnston 1st May 2019 at 8:06 am

    Harry brings up one problem. The other is that many self-employed dont know how well the business has performed and thus how much to set aside. It would make sense to allow a contribution to be made in this tax year and carried back to the last tax year thus reducing the tax bill for that year.

    Sad as it seems autoenrolement needs to be forced on the self-employed otherwise they will have an impoverised retirement, perhaps working until nearly 80 years of age

  3. Mark Champion 1st May 2019 at 8:20 am

    Is it also that self employed individuals take a more diversified look at retirement savings such as property, paying contributions for employed family members to reduce business taxation and even the eventual sale value of their own business? Employed individuals are shoehorned into pension plans often without understanding them or whether they are actually adequate for their retirement aspirations. Perhaps employed civil servants with their gold plated tax payer subsidised retirement provisions have not quite grasped this.

  4. Much of this will come down to education and understanding that you can’t just rely on the state pension.

    Most people like a discount so telling them that if they make a cont. they automatically get a 20% discount is another way of selling the idea to them and for many s/e people who don’t earn much or are already tax efficient via other means RAS means they get the benefit of tax relief regardless.

    Also helping those with companies understand ER cont’s will help.

    Many years ago I believe when HMRC sent s/e people info about other things they did also make them aware of pensions.

    I don’t know if they have done the same more recently but perhaps they could do the same again and include a flyer or something in future perhaps pointing them to MAPS/tPAS’ website,(although their current mid-life reviews miss a large section of the s/e as many are over 50), or speak to their accountant or adviser.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm