It has been a tough year for many, and experts agree that the economic fallout of 2020 has hit the self-employed particularly hard.
But among the bad news stories lurks a glimmer of hope from an unexpected source: the world of private pensions.
It certainly has not been smooth sailing – when Covid-19 hit, there was a sharp halt to pension contributions. New sign-ups to our own service dropped by a staggering 90 per cent in the first week of lockdown.
However, once the government announced tangible support for the self-employed, and the country began adapting to a new normal, we saw a rapid rise in their pension activity.
By July 2020, new account openings had grown by 300 per cent on that March low point, signalling a speedy recovery for the industry. Contributions and new accounts are now growing at a record pace among an audience that was once largely estranged from the world of pensions.
For some, investing in their pension has been a way to proactively combat uncertainty, topping up funds to safeguard future stability in the face of the unknown. For others, the pandemic has provided the time, opportunity and focus to take care of ‘life admin’, such as pension consolidation.
The growth in self-employment pension contributions has also been buoyed by the large swathe of the UK’s workforce that have become self-employed during the pandemic.
Office for National Statistics data on self-employment is not available for this period yet, but in a testament to the resilience and ambition of people in the UK, we expect to see a significant increase in the opening of home-based businesses.
So, as the UK’s attention turns to ‘building back better’ from a very difficult period, the pensions market is one sector that is well-placed to lead the economic recovery – but this will only happen if the government and industry make some radical changes.
First, there is a golden opportunity for the government. HM Treasury has strongly hinted that the self-employed will see tax increases in the near future, which could seriously affect their ability to save for later life.
We believe that there is more the government can do to support its self-employed citizens, such as the installation of a minister for the self-employed, or an auto-enrolment equivalent scheme, where the self-employed are prompted to pay into a pension when paying their tax bill.
Secondly, there are major changes needed in the industry too. Most important is overhauling the long-held misconception that pensions are something purely for the future; funds to be set aside and ignored.
The pandemic has proven that the self-employed and employed alike are more proactive than the industry gives them credit for. To engage with customers, providers need to make pensions relatable in the here and now, instead of focusing on a distant point in the future.
Customers need to be able to check their balance 24/7, be instantly notified when tax relief lands, and shown how their investments are having a meaningful, real world impact today.