On the go: A Department for Work and Pensions trial of techniques to encourage more self-employed workers to save into a pension pot has failed to persuade many to log into their accounts.
The DWP has been working with both Nest and the Association of Independent Professionals and the Self-Employed to encourage long-term saving behaviours amongst the self-employed, who are not covered by auto-enrolment.
The amount of self-employed people actively contributing to a pension has decreased steadily since the late 2000s, from 27 per cent in 2008-09 to 15 per cent in 2017-18. According to DWP research, the main driver of the fall in the participation rate is over-50s stoppping saving once becoming self-employed.
The trials involved sending four different email messages to self-employed individuals, to understand which was most effective in encouraging people to save.
The messages included describing pension contributions as a daily rather than monthly amount, emphasising that payments can be flexible, explaining tax relief on contributions, and highlighting what workers could lose if they failed to save.
Although self-employed workers initially opened these emails, they failed to sign into their pension account or make any changes to contribution levels.
The report stated: “Initial findings from messaging trials suggest that initial ‘open’ rates of messages are relatively high in comparison with analogous industry marketing emails. However, the percentage of recipients engaging further by then logging into their accounts is lower than expected.”
Further analysis from these trials is expected in due course, with Nest planning to publish a full findings report later in 2020.
The DWP said these findings will inform the next stage of trialling, with plans to test technology-based tools and solutions to make it easier for self-employed individuals to save.
On a more positive note, the report also that found employee savers are largely unfazed by last year's rise in minimum contributions to 8 per cent of salary.
Employees saw their share of the burden increase to 5 per cent of salary, but this has had little impact on opt-outs. The rate of those dropping out only rose slightly to 0.76 per cent, up from 0.72 per cent, following the April 2019 increase. Those aged 22-39 were most likely to opt-out following the increase.
Gregg McClymont, the director of policy at The People’s Pension, said: “It's encouraging to see that opt-out rates remain low, following last April’s increase in contribution rates and that saving for a pension has become the ‘norm’ for more than three-quarters of those surveyed by the DWP.
“While automatic enrolment has been a great success so far, the government must provide a timeline for when it will act on its own recommendations to reduce the eligibility age from 22 to 18 and make contributions count from the first pound earned. Reducing the earnings threshold from £10,000 to £6,240 should be a priority too."
Earlier this month, the government opted to maintain the earnings trigger for auto-enrolment at £10,000 for 2020-21, despite long-held industry concerns that the current level is limiting pensions coverage among underprivileged demographics.
Minister for pensions and financial inclusion Guy Opperman also opted to keep the qualifying earnings bands in line with the national insurance thresholds of £6,240 and £50,000.
This is the last annual review being published by the DWP, as the implementation period for auto-enrolment is now over.
