A whistle-stop roundup of pensions at the political parties' annual conferences and a recommendation to stick with the power of inertia for the self-employed, courtesy of Broadstone's David Brooks.
Wholesale reform of pensions tax relief still seems to be in the 'too difficult pile' but could resurface at a later date.
With the government still in desperate need of cash, it would not be a surprise to see it make further small changes, although it looks less likely that it will take the more extreme option and implement the Pension Isa.
The default of being in a pension scheme has worked well so far; it is here that the answer lies
The very vocal Women Against State Pension Inequality group, representing 1950s women feeling hard done by by the changes to State Pension Age, made a lot of noise.
Pensions minister Guy Opperman side-stepped a debate on women in pensions and instead, perhaps mischievously, sent the minister for skills and apprenticeships.
Labour's distraction tactics
Meanwhile, the Labour Party were keen to try and reinvigorate the risk-sharing collective defined contribution pensions model that has been used in the Netherlands by passing legislation to enable the establishment of these schemes in the UK.
These are controversial arrangements that will be unpopular amongst employers burned by defined benefit deficits and costs.
Personally, I would dearly love to be in something better than a DC scheme. However, the ship has sailed and as such it would be better to see efforts focused on making DC better; this is a rather quixotic distraction.
Labour also tried to give something to the Waspi women – early access to State Pension from 64 – but this was rejected by the campaigners. However, it may not be rejected by some of the women in most need.
Looking ahead to the AE review
Any hints at what the ongoing auto-enrolment review will find have been thin on the ground.
However, Guy Opperman did acknowledge that resolving the issue for the self-employed was the biggest challenge and one with no easy answers.
Coincidentally, the Pensions Policy Institute have issued an excellent paper on increasing long-term savings for the self-employed.
The UK’s 5m self-employed make up a large proportion of the labour market and they are largely excluded from the requirements of auto-enrolment. Only one in seven are currently paying into a pension.
There is, of course, something slightly odd about auto-enrolling yourself into something, only to opt-out; or, effectively, paying an additional tax on your profits (if you don’t value a pension).
The PPI examined three main options. The self-employed could be defaulted into pensions in a similar fashion to auto-enrolment; they could maintain and transition their pension contributions from a workplace scheme to an individual or personal pension; or they could be engaged with alternative products for long-term saving, such as Lifetime ISAs.
What should the government do?
It is clear from the PPI research that no one answer is a silver bullet. However, the government should remember from the outset that the goal of auto-enrolment is not to extend pension savings to all.
It is a targeted solution for the low and medium income earners, and the wealthy will look after themselves. However, what we do know is that more and more of the self-employed are not well-off.
The answer will involve two key elements.
A targeted campaign is needed to highlight the advantages of long-term savings, whether Lisa, Isa or pension. We should not be too precious in insisting that a pension is the only answer, and highlight the merits of the three products that people can save into.
Auto-enrolment’s success has been due to the power of inertia, and inertia will be at the core of a successful solution for the self-employed.
Despite the somewhat contradictory method, lower income individuals will have to be defaulted into private pension savings. This would not have an employer matching element and so an additional tax break would need to be considered.
Where people are self-employed via contracting in the so-called gig economy, there would need to be some pressure or incentive for the contracting organisations to facilitate some pension contribution.
We need to include those least able to provide pension savings for themselves. The default of being in a pension scheme has worked well so far; it is here that the answer lies.
David Brooks is technical director at consultancy Broadstone Corporate Benefits.
