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A step towards pension auto-enrolment for the self-employed

Building the pension pots of the UK’s self-employed workforce has long been on the government’s agenda.

In its 2017 manifesto, it committed to “continue to extend auto-enrolment to small employers and make it available to the self-employed”, although at the same time recognising that this would not be easy, given the diverse nature of self-employed work.

December saw the publication of a DWP paper bearing the not-so-catchy title “Enabling retirement savings for the self-employed: pensions and long-term savings trials”.
It detailed the findings of research into the self-employed’s approaches and attitudes to pensions saving. It also outlined the actions that have been taken to trial “interventions” to enable self-employed workers to save for retirement.

Pension provision – employees V self-employed

The report found that pensions and savings coverage among the self-employed varies considerably. While some, mainly older, self-employed individuals have reasonably good provision for later life, pension participation in the sector continues to decline over time.

Analysis suggests that while the self-employed have comparable total assets to employees, a greater proportion of their savings are in property rather than pensions. However a decline in property ownership in the younger generation is likely to impact overall assets for the self-employed, potentially making it more important to enable self-employed individuals to start saving at a younger age.

Mandatory auto-enrolment for employed workers means that the self-employed are much less likely to be actively contributing to a pension than employees and this is supported by overall pension statistics.

Finding the best approach

A recent study by IPSE found that almost a third of those surveyed said that a flexible pension or other saving solution, tailored to self-employment would be their best encouragement to save for retirement.

That aside, 55% of self-employed people have previously been employed and therefore may have contributed to a workplace pension at some stage of their working life. Government trials will focus on encouraging these individuals to use these legacy schemes, however debate continues over who would make the equivalent of the employer contribution.

The DWP will trial this, along with other approaches to measure the impact on pension uptake among the self-employed. The Department will be working on trials with finance services organisations, including Lloyds and Barclays and trade bodies such as IPSE.

Workplace pensions for umbrella workers

If you are employed by an umbrella company, you are entitled to statutory employment benefits and that includes a workplace pension.

Once you join Liquid Friday, you will be automatically enrolled into our company pension, which is administered by NOW:Pensions, so long as you meet the criteria below:

  • Are between 22 years old and state pension age
  • Earn more than £10,000 gross a year
  • Work primarily in the UK

Contributions are deferred for 12 weeks and after that you can opt out if you wish to. However by staying enrolled, you’ll not only benefit from a funded pension when you retire, but you’ll save tax and National Insurance on the contributions.

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