Master trust Nest is trialling incentive-based approaches, including methods used in online gaming and prize draws, with the aim of raising the rate of self-employed workers who save into a pension.
In 2017, only 17 per cent of self-employed workers paid into a pension, according to Nest.
Working alongside research company i2 media research, Nest is also exploring methods to make pensions saving more convenient for the self-employed, as well as investigating ways to improve the online platforms that the self-employed already use to save.
You really need the push of government and regulators to get the industry, as a whole, to do something here
Tom Selby, AJ Bell
According to the Office for National Statistics, there were 4.8m self-employed workers in the UK in 2017, up from 3.3m in 2001.
This represents a jump in the proportion of the workforce that is self-employed to 15.1 per cent from 12 per cent.
Game on for the self-employed
But while the percentage of the workforce that identifies as self-employed continues to rise, the rate of those workers saving into a pension has actually fallen. In 2011, 23 per cent contributed towards a pension.
Will Sandbrook, executive director of Nest’s insight unit, said that trials were at an early stage, revealing that the project will examine solutions involving behavioural economics as it seeks short-term incentives towards pension saving.
Their work will include research into “gamification”, a practice that applies conventional elements of gaming, such as competition and point-scoring, to non-gaming areas of activity.
“If you can do something that incentivises behaviour in the here and now, then that can help overcome some of these barriers” preventing the self-employed from viewing the far future as not relevant, he said.
According to their report, Nest and i2 media research are also investigating “apps that let self-employed people save as they spend”.
Apps like Acorn, which round-up spending to the nearest pound and store the balance within the app, are “a very quick and easy way of getting people to start to build up little sums of money in ways they don’t really notice”, Sandbrook said.
Nest’s sidecar could help poorer self-employed workers
Auto-enrolment has been widely praised for its part in placing nearly 10m savers into pensions. But there has been opposition from industry bodies, such as the Association of Independent Professionals and the Self-Employed, from rolling it out to the self-employed.
Jonathan Lima-Matthews, senior policy adviser at IPSE, praised Nest’s work, adding that its sidecar initiative could provide support towards boosting saving among the self-employed.
Nest is due to launch its sidecar project in early 2019. Individuals will be able to put money aside into both their pension pot and a liquid account, via payroll deduction. This latter account will enable savers to take out money for emergencies.
Cannot afford a pension
Isobel Goodrich is a freelance video editor who does not currently save into a pension. She previously worked for the BBC on a rolling freelance contract, where she did save into a pension with Nest.
“I’m not entirely sure how much money I’ve got in there, and I’m not quite sure how to access it either,” she admitted.
Freelancers regularly find themselves chasing invoices, and an unwritten rule exists in the freelance world that allows for 30 days before payments come through, according to Goodrich.
Because payments do not arrive on a regular basis, financial planning can be difficult. “I know a lot of people who’ve had experiences where they’ve ended up not even getting paid at all,” she revealed.
“At the moment I feel like I’m not really in a position to have enough money to save for a pension,” she said, adding that “something like an app would, I think, be quite useful.”
Its latest research interviewed self-employed workers earning between £10,000-£26,000 a year. “We felt that for this group this is the key solution,” Lima-Matthews said.
Nest’s Sandbrook said that for now, the initiative is aimed at traditional workers, but added that “the idea of an accessible account with some sort of roll-over feature into a more traditional pension product could also form the basis of a solution for self-employed workers”.
Providers and regulators need to do more
Nest and i2 media research are keen to help develop savings opportunities into online platforms already used by the self-employed.
Lima-Matthews argued that “the big fish” among pension providers need to contribute more effort towards helping the self-employed to save.
“I’ve spoken to one provider, [who is] very fixated on this idea of automatic enrolment,” he said. “That to me makes them come across as [if] they don’t really understand the self-employed.”
Tom Selby, senior analyst at platform provider AJ Bell, agreed that providers need to do more, but called for regulators to play their part as well.
“It’s one of those issues where you really need the push of government and regulators to get the industry, as a whole, to do something here,” he said.
