Old Mutual Wealth has dismissed calls for auto-enrollment into personal pensions of self-employed people in the UK as a catch-all solution, as it would not reach almost two thirds of the UK’s five million self-employed individuals.
Jon Greer, head of retirement policy at Old Mutual Wealth, points to the publication of today’s report from the Association of Independent Professionals and the Self-Employed, arguing that auto-enrollmnent would only work for a limited number of people.
The IPSE report, entitle How to solve the self-employed pensions crisis highlighted a number of areas of concern relating to retirement planning and savings for self-employed individuals in the UK.
It states that millennials are not saving for later life “for understandable reasons”, as saving for later life is “a distant prospect” as well as highlighting pensions have a PR problem and Automatic Enrolment (AE) doesn’t work the self-employed.
“IPSE’s findings that only 36% of the UK’s five million self-employed people would remain in a pension scheme had they been auto-enrolled, reflects that there are the very legitimate reasons why some self-employed people choose not engage with pensions,” said Greer.
‘Lack of certainty’
“One of the biggest challenges facing the self-employed is the lack of certainty and security of income, which is particularly evident for those with lower and moderate incomes. There is evidence that they resist locking away their savings and tend to favour certain investments like Isas over others. IPSE has suggested that a pension sidecar should be explored, a pool of money made accessible at any age in times of need.
“This would get away from the ‘either or’ nature of pension saving and serve to make pensions more appropriate for the diverse self-employed population.”
The report concluded that only a third of self-employed people are saving into pensions, something that Greer believes that without UK government intervention this is “unlikely to change”.
“A copy-and-paste approach cannot be used to extend auto-enrolment to the self-employed,” he added. “Auto-enrolment works around the infrastructure of the workplace and more creative solutions will be required for the self-employed.
“The [UK] government needs to look at various options and it is likely that taking advantage of new opportunities in the planned digital tax system will offer a workable solution.”