Automatic enrolment  

DWP concedes self-employed savings trials have failed

DWP concedes self-employed savings trials have failed

A trial by the Department for Work and Pensions (DWP) to encourage more self-employed workers to save into a pension pot has been unsuccessful as many workers are still failing to log into their accounts.

A 121-page report from the DWP, published today (February 24), revealed the number of self-employed people actively contributing to a pension has decreased steadily since the late 2000s, from 27 per cent in 2008-09 to 15 per cent in 2017-18.

According to the report, which is carried out on an annual basis, the main reason behind the fall in the self-employed pension participation rate was due to the number of over 50s who stopped saving once becoming self-employed.

The DWP has been working with both Nest and the Association of Independent Professionals and the Self-Employed (Ipse) to encourage long-term saving behaviours amongst the self-employed, who are not covered by automatic enrolment. 

This was after in 2018 in published a strategy paper which explored using invoicing and accounting systems to enable automatic pension contributions for this group.

The trials involved sending four different email messages to self employed individuals to understand which was most effective in encouraging people to save.

The messages included describing pension contributions as a daily rather than monthly amount, emphasising that payments can be flexible, explaining tax relief on contributions and highlighting what workers could lose if they failed to save.

However the trials were unsuccessful as although self-employed workers initially opened these emails they failed to click through and sign into their pension account and make any changes to their contribution levels, the DWP stated.

The report stated: “Initial findings from messaging trials suggest that initial ‘open’ rates of messages are relatively high in comparison with analogous industry marketing emails. However, the percentage of recipients engaging further by then logging into their accounts is lower than expected.”

Further analysis from the trials is expected in due course with Nest planning to publish a full findings report later in 2020.

The DWP said these findings will inform the next stage of trialling, with plans for technology-based trials to test tools and solutions which would make it easier for self-employed individuals to save.

On a more positive note, the report found since the start of auto-enrolment in 2012, more than 10.2m workers have been enrolled in a pension scheme and more than 1.6m employers have met their duties.

The annual total amount saved in workplace pensions stood at £90.4bn in 2018, which is an increase of £7bn on 2017. 

Last year, auto-enrolment minimum contribution rates rose to 8 per cent, made up of 5 per cent from the employee and 3 per cent from the employer, but this has had little impact on opt-out rates.

In the three months following the April 2019 increase, the opt out rate only rose slightly to 0.76 per cent, up from 0.72 per cent.

Those aged 22-39 were most likely to opt-out following the increase.

Secretary of state for Work and Pensions, Therese Coffey, said: “Automatic enrolment has been an unparalleled success, transforming pension saving for millions of people.