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Inquiry launched into self-employment and pension enrolment

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
01/12/2016

A committee of MPs has launched an inquiry into self-employment seeking views on whether this growing group should be required to enrol into a pension scheme.

The Work and Pensions Committee has launched an inquiry to look at how the self-employed are being supported by the UK welfare system.

It noted there are nearly five million people (15% of the workforce) who are registered as self-employed and the proportion has been growing since the early 2000s.

However, the increase in self-employed has been mirrored by a decline in the numbers contributing to pensions.

As a result, the committee is seeking responses to these two questions:

  • How can self-employed people best be encouraged and supported to save for retirement?
  • Should self-employed people be required to enrol in a pension?

The inquiry’s been launched just hours after figures from the Department for Work and Pensions (DWP) reveal that to date, almost 6.9 million workers have been automatically enrolled since 2012.

In 2015, the annual total amount being saved by employees was £81.8bn, an increase of £1.4bn from 2014 and a further £7.1bn since the launch of auto-enrolment.

However, despite the positive numbers, Jon Greer, pension expert at Old Mutual Wealth, said the system needs to be re-booted to keep up with employment trends as two key groups (self-employed and low-paid) are being left-out.

“The figures shows there has been a steep decline in pension saving in the self-employed over the past decade. Less than one in five are now partaking in the pension saving system. With the number of self-employed people growing significantly in recent years, fuelling the economy through a challenging period, it is absolutely critical that this large and vital part of the workforce are not forgotten by the pensions system.”

Greer said that in the upcoming review, the government also needs to address pension saving for those on low pay.

“The £10,000 threshold should be brought down or abolished. It is not acceptable that the lowest earners miss out on tax relief and employer pension contributions enjoyed by their peers. There has been a big focus on the terms of employment for those on low-pay, and part-time or even zero-hours contracts, but they are still second-class citizens when it comes to pensions.”