IPSE: Auto-enrolment not suitable for self-employed professionals
5th July 2018 | News
A new report from the Association of Independent Professionals and the Self-Employed (IPSE) claims the UK’s existing auto-enrolment system for workplace pensions is not suitable for the self-employed.
Less than a third (31%) of the UK’s army of six million self-employed workers are paying into a pension. However, the IPSE believes the Government and pensions sector must work together to find bespoke ways of helping the self-employed to save for the future.
Within its survey of more than 1,000 self-employed professionals, the IPSE dismissed suggestions that freelancers and independent workers were well-suited to auto-enrolment pension schemes. The IPSE highlighted that just 36% of its survey respondents said they would remain enrolled in a pension scheme, while 64% said they were either unsure about their scheme or were planning to opt out.
Jonathan Lima-Matthews, Senior Policy Adviser at IPSE, said: “With just 31% of the self-employed saving into a pension, we must take urgent action to avert a looming crisis.”
Mr Lima-Matthews insisted that although auto-enrolment should be considered a “successful policy” for “boosting the number of employees paying into a pension”, the current pension provision did not cater to the needs of the self-employed.
“There is no employer to enrol them, and it also reduces their ability to be flexible and in control of their money – two of the fundamental attractions of self-employment,” added Lima-Matthews.
Instead, the IPSE claims a “sidecar pension scheme” should be devised for independent workers, giving them the freedom to save for later life, as well as a ‘rainy day’ fund to pay for emergencies.
The IPSE also recommends that the Government provides free mid-life MoTs for self-employed individuals. It believes strongly in connecting mature self-employed professionals to financial advisers to assess their long-term financial health and highlight areas where they can improve their savings for later life.
A national financial guidance body is due to be set up later this year, offering tailored advice on the self-employed’s pension prospects.
Meanwhile the UK’s Department for Work and Pensions is also due to road test potential options that would make it easy and attractive for the self-employed to save.