Self-employed people should be auto-enroled through their tax returns, according to a new proposal from Royal London and Aviva.
In a report published this morning, the providers attempt to tackle the pensions savings gap among the self-employed by increasing Class 4 National Insurance Contributions, but directing this into a nominated pension instead of the Treasury.
The headline NIC rate would increase by 3 per cent to 12 per cent, but this would be ‘reclaimed’ by having it put into a pension, providing the self-employed paid a matching contribution from their profits.
The profits that would be diverted into the pensions by the self-employed person would be matched by the Government at some level.
Using the annual tax return process for the self-employed, a series of boxes would appear early in the process giving the individual the option to pay the diversions into their existing pension, be defaulted into a randomly assigned approved provider, or opt-out.
It would resemble auto-enrolment in the self-employed individual could not continue their return until they had completed this.
Royal London director of policy Steve Webb said at the launch of the report this morning: “With auto-enrollment my preference used to be that you put the fact that you can opt out on page 64 of the form. In Latin. When we tested it turned out that actually you put people straight back in control right at the top, immediately you say to them that you don’t have to do this…We got more people staying in when we were straight with them.”