Editorial: Self-employment is more common than ever, and the distinct lack of any concrete solution to get these people saving for retirement is becoming increasingly worrying.
The government is working on it, testing a series of “targeted interventions” to encourage contributions. But for now, there are still around 5m self-employed people, up from 3.3m in 2001, according to the Office for National Statistics, many of whom are not saving for the future.
Instead of trying to extend auto-enrolment to these workers, the Association of Independent Professionals and the Self-Employed has recommended that Nest’s sidecar account initiative be rolled out.
The self-employed range from wealthy business owners to gig economy workers. For many, the need for liquidity puts them off the idea of a traditional pension. The sidecar model would split contributions between a pension pot and a “rainy day” fund – addressing this issue.
Concerns over illiquidity and affordability are indeed preventing many self-employed people from saving into a pension. But could a lack of engagement or understanding be just as problematic?
The trade body found that 26 per cent of those surveyed called for clearer advice on pensions – with poor communications deterring self-employed people from putting money aside.
For those who have been saving into a pension, one of the Financial Conduct Authority’s proposals in its Retirement Outcomes Review involves introducing investment pathways for drawdown.
Many have welcomed the recommendation, which – if implemented – could protect savers from the risk of staying in cash over the long term.
The FCA’s stance that the option of capping charges “remains open”, has been more divisive. Some maintain that a charge cap could hinder the development of investment pathways. Others, including chair of the Work and Pensions Committee Frank Field, think the watchdog should “just introduce it”.
But despite some sighs of disappointment, most of the FCA’s proposals show a general step towards better protection of pension savers.
Sophia Imeson is associate editor at Pensions Expert. You can follow her on Twitter @SophiaImeson and the team @pensions_expert.
