The question of auto-enrolment (AE) “for all” is one that been raised since the announcement of the process itself and recently the government have announced that the pension process could be extended to include self-employed workers. Due to current complexities and a lack of knowledge within this group the announcement has been positively received and a number of solutions put forward.
The auto-enrolment process has now been in place through employers for a number of years and has shown great success in bringing employees into the world of pension funds and contributing towards their retirement. In fact, studies show 88% of private sector employee’s now have some form of workplace pension – up by over 30% since “AE” commenced. So now there’s a need to find a mechanism to allow self-employed workers to enjoy the same benefits and opportunities.
In comparison, its claimed that just one in five of the four million-plus self-employed workforce has any form of pension “vehicle”. Its viewed by many that getting from day to day and tax planning in the self-employed environment have in the past taken priority but with state supported pensions diminishing it will become imperative that all UL workers save for their future.
The two key potential solutions under review currently are an extension of the Lifetime Isa (Lisa) and use of the national insurance (NI) system.
Its considered reasonable that with changes Lisa be beneficial for some self-employed workers. An example would be that these could be open to 55 years old, instead of the current 40 so those self-employed can benefit from the government top-up and could also increase the flexibility around withdrawal to assist in managing personal cash flow.
There’s also a belief that there’s an opportunity for schemes to be managed through employers where self-employed workers are contracted for long periods of work. For others, the tax or national insurance system would seem the most practical means of facilitating. For example, self-employed NI could be increased on a gradual basis, with the extra being paid into a private pension.
