The Government has today set out how it plans to boost retirement saving among the self-employed, following a commitment in the Conservative manifesto to “make auto-enrolment available to the self-employed”.
You can read the full paper here: http://qna.files.parliament.uk/ws-attachments/1027443/original/Self%20Employed%20Savings%20Trials%2018.12.18.pdf
Key points:
• Almost 5 million people in the UK are self-employed but only 14% were saving in a pension in 2016/17 – down from 30% in 2007/08
• The rise of the so-called ‘gig economy’ has dramatically increased the number of self-employed workers
• DWP paper focuses squarely on using marketing and behavioural nudges to encourage the self-employed to save for retirement
• Series of trials will target three specific areas:
o Marketing interventions aimed at people who have already saved
o Marketing interventions using trusted third parties such as trade bodies and unions
o Behavioural prompts using invoicing services and banking
• Government also assessing whether app-based technology can form part of the long-term solution
Tom Selby, senior analyst at AJ Bell, comments:
“It is hard to see how the set of interventions and trials outlined by the Government today amount to making auto-enrolment available to the self-employed.
“It is now abundantly obvious that this promise was made in the rush of the general election campaign without any real thought to the practicalities of making it happen. As it stands, the Conservative Party therefore looks set to breach this particular manifesto commitment.
“However, it is possible some good can come from the embers of this broken promise. The focus on building simple, effective communications that elicit positive action from savers is absolutely the right one and should be applicable across the retirement savings landscape.
“We would urge the DWP to engage not only with industry and the self-employed but also regulators to ensure comprehensive, workable solutions are brought forward.
“The focus on boosting saving among the self-employed presents an opportunity to look again at the Lifetime ISA, a product which could potentially appeal to many people.
The age restriction and exit penalty are significant barriers at the moment – scrapping both could make it seriously attractive as a more flexible retirement saving alternative.”
