Automatically enroll the self-employed into saving through the tax system, says new parliamentary group

The call comes in the first report of the All-Party Parliamentary Group on Financial Resilience, ‘Saving, Spending, Surviving: a holistic view of people’s financial resilience during the pandemic’, which was published on Monday.

The idea of using self-assessment tax returns to help the self-employed save into a pension has been supported by former pensions minister Sir Steve Webb. It could involve using tax returns to default the self-employed into a pension with the ability to opt out, similarly to how auto-enrolment works. It was supported by the chief executive of the Pensions Regulator at a Work and Pensions Select Committee session in June, and was put to the APPG by IPSE, who were one of the witnesses to the committee.

Speakers at the launch event included APPG chairs Tonia Antoniazzi MP (Lab) and Shaun Bailey MP (Con).

Other recommendations in the report include:

• The Government should work with the financial services industry to enable the development of flexible savings products for those who may need access to a rainy-day fund but still want to save for later life.
• The Government should introduce policies to improve the resilience of single parents, including reviewing the 15 and 30-hour marks of childcare support.
• Given the low levels of financial education and engagement in the UK, the Government should work closely with existing avenues of guidance as a step to improving public awareness of finances. Take-up of Government services such as MoneyHelper and Pension Wise should be improved, and expert non-profits should be worked with as consultants or providers of financial guidance.
• The Government should work with employers to improve the ways they communicate financial information to their employees.
• An independent review into the rate and design of Statutory Sick Pay to ensure that people are not choosing between their financial resilience and protecting others.

The report is here.

On a related theme a Conservative MP presented a bill to extend pensions automatic enrolment to jobholders under the age of 22 and lower the qualifying earnings threshold for automatic enrolment, in the House of Commons on Wednesday 20 July.

Richard Holden’s ‘ten minute rule’ bill seeks to amend sections 3 and 5 of the Pensions Act 2008 to lower the age of auto-enrolment to 18, and section 13 to lower the earnings limit: not automatically but allowing the Secretary of State to make those change through regulations.

The Bill “means an extension of the transformation that we have seen with auto-enrolment over the past few years – an extension that will be as big as the share ownership changes of the 1980s and right to buy,” said Holden. “The Bill will make a massive difference to the lives of those young workers.”

He said people who earn £9,000 from two separate jobs - who may be working 12 to 18 hours a week, juggling their jobs around childcare or caring responsibilities - do not currently get the benefits of auto-enrolment at all. Under this legislation, somebody in that position would see their pension savings almost triple to up to £300,000 over a lifetime.

The Bill is scheduled for a second reading on 28 October 2022, but is unlikely to become law.

The session is here.