The government is looking at ways to encourage the self employed to save more for retirement

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Fewer than one in seven self-employed people (14%) are saving into a pension. The government wants to get more self-employed people to save for their retirement, but how does it plan to do this?

What is the government considering?

It’s not currently considering ‘automatic enrolment’, which means many people who are employed or on a contract are put into their employer’s pension. Instead the government is partnering with a number of pension companies that are going to trial different options.

This is taken directly from the Department for Work and Pensions Paper:

NEST: The Insight team from pension provider NEST will carry out a range of trials. Initially, it will look at whether changing the way companies pension communicate with people encourages those who are self employed to save into a pension. It will also look at whether it can prompt people to save into a pension, or let them make contributions, through invoicing or accounting software.

Aviva: Aviva will run a series of pilots promoting pension saving to the self-employed. The pilots will test how best to explain the benefits of saving into a pension to people who are self employed. These campaigns will take place across the first half of 2019 with some starting from February 2019. The results will be monitored throughout the year. There should be some early results in the second half of 2019.

Lloyds Banking Group: During the first half of 2019 the bank will test a range of ways of making it easier to save into a pension. For example, saving from a bank account to a pension, through a banking app and setting up a facility on the banking app so people can make one-off payments into their pension.

The DWP is also working with IPSE (the Association of Independent Professionals and the Self-Employed), Smart Pension, Aegon and NEST Insight to find new ways to get more of the self-employed saving for retirement. Researchers will test different communications with IPSE members. IPSE, Smart Pension and Aegon will work to identify which messages are most effective.  Researchers will then be able to track their how much time people spend reading these online messages, whether they click through to the pension companies and whether they take out pensions as a result.

IPSE is also working with Smart Pension to develop a new savings product that lets people who are self employed save for the short, medium and long term.

Barclays: Barclays are carrying out research in relation to their self-employed customers. The research will be anonymised and carried out from early next year. There’s not much information about exactly what this research involves.

Facts and figures relating to self-employed women

Self-employed women and men earn less than those who are employed. But the difference is bigger for women who are self employed, compared to men. Government figures from 2015-16 show:

  • Women who are employed full time earn £428 a week, on average.
  • Women who are self employed and work full time earn £243 a week, on average.
  • Men who are employed full time earn £533 a week, on average.
  • Men who are self employed and work full time earn £363 a week, on average

My view

While I think these trials will probably produce some interesting results, they won’t close the gap between the amount that people who are self employed are saving for their retirement, and how much they need to save. Automatic enrolment – while not perfect – has meant that millions of people who are employed or on a contract, are now setting aside money for their retirement.

Some of the results of these trials may well be valuable, but it feels like we’re wasting precious time when a bigger change is probably needed to help self-employed people to save.

Related articles:

The SavvyWoman Podcast 17- Pensions and the self-employed – all you need to know with Kate Smith from Aegon

Your rights if you’re employed, self employed or a worker

Saving into a pension if you are self employed

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