Calls on government to nudge self-employed into retirement planning
The lack of pension coverage amongst Britain’s self-employed has reached a crisis? level, according to new research by mutual society Royal London.
Just one-in-five self-employed men are now saving into a personal pension down from 62 per cent in the mid 1990s.
To remedy the situation, the report calls for an increase in the rate of National Insurance paid on self-employed individuals? profits, from nine per cent up to 12 with freelancers able to divert the increase into a pension fund.
‘self-employed people are missing out on the surge in pension scheme coverage among employed earners. Indeed, whilst the number of self-employed people is growing, their membership of pension schemes has collapsed and is now at crisis levels. It is time for action, said Royal London policy director Steve Webb.
using the existing National Insurance system to mirror the process of automatic enrolment is the best way of giving self-employed people a nudge? to start saving for a pension. In addition, because self-employed NICs are linked to profits, contributions would automatically go up in good years and down in poor years. Without action, millions of self-employed people could face poverty in old age, he added.
Additional research carried out by Citizens Advice in January 2016 found that 54 per cent of self-employed people are concerned about their lack of retirement planning with too little understanding holding them back from making informed decisions.
Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics as well as running a tutoring company.
Over 1.7m self-employed British workers will continue to earn below the new National Living Wage when it comes into effect in April 2016 according to a study from think tank the Social Market Foundation (SMF). more»