The Treasury Select Committee has unanimously agreed that the Treasury should “keep an open mind” regarding auto-enrolment pensions for the self-employed.
The influential group of MPs said that it is “not clear that the Government has a clear strategy or timetable” for helping those who work for themselves save for retirement.
Earlier this summer, a report from the Association of Independent Professionals and the Self-Employed insisted that the UK’s automatic enrolment system for workplace pensions was unsuitable for self-employed professionals.
IPSE found 31% of self-employed professionals surveyed would stay auto-enrolled on a workplace pension scheme, with a quarter prepared to quit the pension scheme in favour of keeping more of their pay check in the short-term.
Their report also suggested creative ways of helping the self-employed to save rainy-day funds using ‘sidecar’ pension schemes. These would give individuals the flexibility to set aside funds as and when they saw fit.
IPSE insists the Government and pensions sector must work together to find a new way of helping sole traders save for the future, the Treasury Select Committee would appear to have other ideas.
The Committee believes there is an “urgent” need for the Government to consider using self-assessment tax returns and National Insurance contributions (NICs) to automatically enrol self-employed people into the pensions system.
The MPs have suggested that tax returns could be used as a mechanism to encourage the self-employed to place up to 5% of their earnings into a workplace pension scheme.
The Committee also said that by excluding independent professionals from auto-enrolment, this has “exacerbated the incentives for employers to create pseudo-self-employment roles, without the degree of autonomy normally associated with self-employment, in order to benefit from lower taxes”.