“I can’t see how that would work,” he said. “It is a good idea in theory, but how do you make someone who is self-employed automatically enrol? You’d have to make it compulsory. And if you made it compulsory for the self-employed, you’d have to make it compulsory for everyone.”
Mr Sanderson said any review of the auto-enrolment system should prioritise the relief at source versus net pay issue – an anomalous situation that sees low-income members of “relief at source” schemes receiving government top-ups, disguised as tax relief, on their pensions, while members of “net pay” schemes do not.
“The availability of good quality, low fee pension schemes that offer relief at source should be a priority.” He said of the schemes with master trust assurance framework accreditation, only Nest and The People’s Pension offer relief at source.
He also suggested advice provided to micro-businesses should be VAT-free. He added a review should look at master trusts’ investment strategy, some of which are limited to one or two funds. “And if that goes pop, there’s nowhere else to go,” he said.
He said calculating contributions based on band earnings rather than full income was “a pointless way of doing things” and “not enough for anyone on £20,000 or £30,000 a year to live on”.
My Sanderson said contribution rates should go up to 14 or 15 per cent, and something needs to be done to encourage people to consolidate multiple small pots.
james.fernyhough@ft.com
