Self-employed workers need solution to incentivise retirement saving
• New policies would make pensions simpler and save the Exchequer £2.7 billion per annum
• Recommendations outlined as part of a campaign to rebuild the habit of savings to provide for financial security, especially in retirement, before the UK reaches a tipping point in 2035(1)
TISA, the financial services membership association, has called for the creation of a Self-Employed Pension scheme with a higher Government matching payment to compensate for the loss of the employer contribution. This would help move an individual towards the one-for-one match under auto enrolment. The proposal is aimed at the lower and middle-income self-employed and so would be limited to those earning up to £30,000 gross per year. A low annual contribution limit of £4,500 is also suggested. At a time when the number of self-employed people is growing and now represents 15% of the UK workforce, it believes that greater focus should be placed on supporting and incentivising this crucial group.
TISA states that 23% of self-employed people are expecting to fund their retirement with pension savings, and of those, the amount that they have saved is half the average of employed peoples’ pension pots. Self-employed workers do not benefit from employer contributions and TISA’s research reveals that this is resulting in them losing around £91,500 in contributions over their lifetime.
Adrian Boulding, Policy Strategy Director of TISA said:
“We recognise that self-employed workers receive some benefits with regards tax and NIC treatment. However, this is balanced by benefits that employees receive from the state as well as the uncertainty they have around their incomes. Our greatest concern is for low and middle-income self-employed workers who are typically sole traders – only 6% of who have a business to sell upon reaching retirement. For many of them, it is a case of closing the door or selling the van and being reliant on a state pension. This is unsustainable as it will leave thousands in poverty and increase the burden on already stretched Government finances.”
The policy has been developed by TISA’s Savings and Investments Policy project(2), (‘TSIP’, ‘the Group’) as part of a detailed set of recommendations to incentivise long-term saving including research(3) of consumer preferences.
TSIP is an unprecedented group of over 50 leading financial services companies, trade bodies and consumer groups which published a report (‘Saving Our Financial Future’) in March 2015 outlining six policy recommendations to rebuild a culture of savings in the UK and restore financial security for households.
Further details on each proposed policy are available on request.
Ends….
For further information please contact:
Alistair Kellie – Telephone: 020 7680 6558/Email Alistair.Kellie@newgatecomms.com
Sara Lyons – Telephone: 020 7680 6550 / Email Sara.Lyons@newgatecomms.com
Email: TISA@newgatecomms.com
Notes for Editors
TISA is a not-for-profit membership association operating within the financial services industry. We represent the interests of over 147 member firms involved in the supply and distribution of savings and investment products and services.
TISA has a highly successful track record in working cooperatively with government, regulators, HMT, DWP and HMRC to improve the performance of the industry and the outcomes for consumers. Policy and regulation continues to be the major focus for our members with regard to corporate responsibility.
TISA and its members’ remit is evolving into a clearer focus on pro-active consultation in the regulatory world in order to influence policy and associated regulation before its creation, rather than reacting to issued policy directives. This will help to ensure a more considered policy creation from the authorities.
1. The TSIP initial report ‘Our Financial Future’ highlighted that we are set to reach a tipping point in 2035 when a generation retires less well-off than the previous one – a situation not seen since the establishment of the welfare state almost 100 years ago.
2. The Savings and Investments Policy project is working with a wide range of financial service companies, trade bodies and consumer groups to develop these pan-industry proposals. It is directed by an Executive Committee formed of 16 leading financial services companies including Aviva, AXA Wealth, BNY Mellon, BlackRock, Ernst Young, Henderson, J.P. Morgan Asset Management, L&G, Lloyds Banking, Nationwide, Northern Trust, Old Mutual, Pinsent Masons, RBS, Threadneedle Investments and TISA.
3. The Wisdom Council conducted qualitative and quantitative research with a demographically representative sample of 290 people aged 18-75 who are classed as “pre-retired.”