PensionsFeb 7 2018

Government review 'fails on self-employed pensions'

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Government review 'fails on self-employed pensions'

The Taylor Review, which concentrated mainly on the gig economy and workers rights, recommended stricter enforcement on holiday and sick pay rights, and higher fines for firms that mistreat staff.

The government says it has gone even further than the review suggested, in what the Institute of Directors called "the biggest shake-up of employment law in generation".

However, the response provided little on pensions.

Steve Webb, former pension minister and policy director at Royal London, said the government response “offers little hope for improving the pensions of the self-employed”.   

“The government’s automatic enrolment review merely proposed some further research and testing on pensions and the self-employed, which is not up to the urgency of the problem,” he said.

The Taylor Review made recommendations for pensions for the self-employed, noting many do not have retirement savings.

It called on the government to explore ways to improve pension provision among the self-employed, including auto-enrolling self-employed people into a pension and administering this through HMRC's tax self-assessment process.

Mr Webb said this policy had been “kicked ‘into the long grass, meaning millions of self-employed people face an insecure retirement”, in what he described as a “very worrying” situation.

The government response begins a 16 week period of consultation.

Rachel Reeves MP, chair of the business, energy and industrial strategy (BEIS) committee, said the government response is “long overdue” and described progress as “painfully slow”.

“I am worried that these further consultations are being used to delay making these much needed changes to how people work in the modern economy,” she said.

Self-employed workers lag behind the employed when it comes to retirement saving.

Recent government figures showed three in four self-employed people aren’t making pension contributions.

Sean McCann, chartered financial planner at NFU Mutual, said this meant “3.5 million adults who are missing out on a big helping hand from the government to boost their retirement savings".

"While auto-enrolment is making it easier than ever for employed people to save for their retirement, many in self-employment put off saving into a pension in favour of investing in their own business,” he warned.

"Many, many self-employed people may be missing a trick and could be facing having to extend their working lives by years, if not decades.”

Despite the gap between the self-employed, who are not auto-enrolled into pensions, and the rest of the UK, the government has delayed legislation to help encourage them to save.

In December last year, the auto-enrolment review report said that it would legislate on the issue before the end of parliament, or 2022.

With this decision, the government is considered to be breaking one of its manifesto commitments – in which the Conservative Party said it would include the self-employed in the auto-enrolment reforms.

Check out FTAdviser's CPD on how to help the self-employed save for a pension HERE