The Department for Work and Pensions (DWP) is aiming to expand pension coverage among the self-employed.
Pension automatic enrolment has become a major success since it was launched nearly seven years ago, with almost 10 million people joining a workplace pension arrangement. Take-up rates have been much higher than some pundits had forecast – the latest calculation from the DWP showed that in 2016/17 the overall opt out rate was just 9%.
However, there is one group of people that the automatic enrolment regime completely misses: the self-employed. According to the DWP, the self-employed account for about 15% of the UK workforce – 4.75 million people. Private pension coverage in this sector is low, despite the tax benefits on offer. The DWP has calculated that in 2016/17, only about 1 in 7 of the self-employed were saving into a pension.
Encouraging pension saving
In December the DWP announced that it would be running a programme of trials aimed at encouraging the self-employed to start saving. These trials will involve a range of trade bodies and financial services organisations, including the main government initiated auto-enrolment scheme, NEST, which now has over seven million members.
If you’re self-employed and one of the 6 in 7 who isn’t yet saving for your retirement, don’t wait for the DWP to find ways to push you into action. Simply put, with no private pension provision, your retirement pension will be the new State Pension – £168.60 a week (£8,767 a year) from April 2019. Remember, too, that the State Pension is only payable from State Pension age, which is now in the process of rising to 66 by October 2020 and 67 by April 2028.
If you want a higher pension, and/or you don’t want to wait until the state decides it is time for you to retire, then the sooner you begin to consider your retirement planning, the better.