Government response to Taylor Review into the ‘gig’ economy published today
Latest ONS data lays bare the gulf between employed and self-employed private pension provision
A shocking 45% of self-employed workers aged 35-54 have no private pension wealth, compared with around 16% of employees
It remains unclear what solutions policymakers will pursue to address this widening pension gap – although boosting the Lifetime ISA could help
Tom Selby, senior analyst at AJ Bell, comments:
“The latest official data exposes the chronic lack of retirement saving that exists among self-employed UK workers. Some will probably expect their business to eventually pay them enough to live on through old age, while others might be using all their spare cash to grow their company today. Inevitably, there will also be a group who simply haven’t got round to thinking about retirement at all.
“While the problems are clear, the answers are less obvious. Automatic enrolment has been successful in boosting pension saving among employed workers but the Government has already been clear it does not believe the matched contribution on offer here can be replicated through the tax system.
“Improving communications of the retirement savings options already open to the self-employed – and particularly the value of pension tax relief – would be a good place to start. Even without a matched employer contribution the bonus of pension tax relief, particularly for higher earners, remains an extremely attractive incentive.
“Furthermore, the Lifetime ISA provides a more flexible alternative to a pension, particularly for self-employed workers who remain basic-rate taxpayers. However, the 25% early withdrawal penalty imposed by the Government and the age limit of 39 restrict the attractiveness and availability of this product to self-employed workers. Reviewing these restrictions and perhaps raising the LISA limit to, say, £8,000 a year would be one way of encouraging those who work for themselves to save more retirement.”