Industry says self-employed reforms should go further

Industry says self-employed reforms should go further

Philip Hammond’s decision to reform the National Insurance contribution system for the self-employed has been met with scepticism, with some saying he should have gone further.

Industry figures have said the reforms need to go further to address the growth of self-employment and the prospect of a “retirement gap”.

Steven Cameron, pensions director Aegon UK, said: “More needs to be done to close disparities inherent in the current gig economy, and between the employed and the self-employed.

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“Within pensions, we need to find a solution equivalent to auto-enrolment for the self-employed to halt the growing retirement income divide we’ll otherwise face between them and their employed peers when they come to retire.

“One way forward to soften the blow would be to ‘rebate’ part of the increase in NI into a private funded pension of the self-employed individual’s choice, along the lines of auto-enrolment for employees.”

Mr Hammond increased the main rate of class four National Insurance contributions by 1 per cent to 10 per cent make the tax system more equal for the employed and self-employed.

This will take effect from April 2018 and will be followed by a further 1 per cent increase in April 2019.

In announcing these changes, Mr Hammond said employed and self-employed used public services in the same way but were not paying for the in the same way.

But Old Mutual Wealth’s pension expert, Jon Greer, said the self-employed missed out on many benefits such as sick pay and holiday entitlement.

He said: “Later this year the government will review the pension reforms, known as auto-enrolment, which ensure all employees save by default for their retirement.

“They benefit from tax-relief and pension contributions from their employer in the process.

“But the self-employed are currently excluded from the private pension system unless they make their own arrangements.

“Today’s news strengthens the case for the government to address this imbalance and ensure the self-employed enjoyed a comparable opportunity to save for their retirement.”

Tim Walford-Fitzgerald, private client principal at accountancy firm HW Fisher & Company, said: “Narrowing the tax difference does nothing to reduce the inequality of rights enjoyed by those working for themselves compared to people in stable employment.

“The regular wage slip is a world apart from the increased risks and uncertainty involved in running your own business.

“These tax changes do not reflect the practical distinctions between employment and self-employment.”