The Ipsos Mori research found the self-employed see the features of an ideal pension product as:
- Flexibility to withdraw in emergencies;
- Security that money would not be lost (on death or if the provider goes out of business);
- Potential for good returns on their savings;
- Automatic set-up;
- Information, including about income in retirement.
While, generally, research finds the self-employed would prefer a voluntary approach, we should not discount all forms of auto-enrolment. 60 per cent said they would be prepared to make a small cutback in their lifestyle to save for retirement.
Some self-employed individuals have employees they must auto-enrol and might extend this to themselves. And those contractors working for larger employers deemed as employees may find they are auto-enrolled in any case.
A large number of individuals also move from employed to self-employed, with 47 per cent of self-employed having spent more than half of their working life as employees.
The 18 per cent who are concurrently employed will, if eligible, have been auto-enrolled.
So, many already have a workplace pension and even on leaving employment, many can be ‘converted’ to individual pensions, allowing contributions to continue.
While there are other priorities when starting your own business, there might be merit in those who leave to become self-employed agreeing to a ‘trigger’ which will restart contributions after a period of say 12 months, unless they choose to ‘opt out’ at that time.
We also have the Lifetime Isa. This has not proven particularly popular, and for most employees is far less suitable than a workplace pension with employer contribution. But it does offer a viable alternative to traditional pensions for the self-employed, and can be accessed early, albeit with an exit penalty.
Implications for advisers
The government has clearly identified that the self-employed population is diverse, with a wide range of different characteristics, needs and behaviours when it comes to saving for retirement.
But it remains committed to improving participation among this increasingly important sector of the workforce.
Of course, the more diverse and individualised the needs, the greater is the value in seeking individual professional advice.
We look forward to seeing the outcome of the trials. But in the meantime, there are huge advice opportunities.
Steven Cameron is pensions director at Aegon
