Call To Give Self-Employed Easier Pension Rights

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Self-employed workers should have easier access to their pension cash than other workers, according to a think tank report.

Allowing them some of the money out of their retirement savings over the previous two years would encourage many more of the self-employed to start a pension, claims the think tank Demos.

The group looked at the latest Office of National Statistics figures detailing how many of the self-employed were saving in a pension to come up with their conclusion.

The statistics showed less than a third of the self-employed regularly contribute into a pension, compared with half of employed workers.

However, the number of self-employed is growing and now stands at 4.6 million full and part time workers citing self-employment as their main source of income.

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Locking away cash

Demos, which is an independent, non-politically aligned body, alleges the self-employed ignore pension savings because they fear locking away their working capital in a fund they cannot access until they are aged 55 years old.

Many regard their savings as ‘rainy day money’ for times when they cannot work.

“Our view is that if the self-employed could access some of the money they had earmarked for retirement over the past two years as a back-up if they needed the cash, more would see saving into a pension as a worthwhile idea,” said a spokesman.

“The fear of locking money away would not be so great and they could plan their finances better with a more flexible savings plan.”

Demos also wants to see other financial incentives for the self-employed which would bring them more into line with benefits offered to employed workers.

These include the option of paying towards maternity or paternity leave and tax breaks for training to take up new skills.

Training tax breaks

Currently, tax rules only allow for work-related training.

For example, a carpenter could claim the costs of a building course but not training as a football coach.

Demos Research Director and author of the report containing the recommendations, called Going It Alone, Duncan O’Leary, said: “The self-employed do not save as much for their retirement as employed workers and the unreliable income pattern many of them have to deal with is mainly responsible.

“It’s likely this will worsen, as the trend seems to show the self-employed slipping behind employees in retirement saving.

“They fear locking up money in a pension they might need to pay the bills in lean times or to expand the business if things go well, so a more flexible contribution and withdrawal scheme seems a sensible idea.”

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