The RSA has published a report on retirement saving for the self-employed, titled ‘Venturing to Retire’. The lead proposal is for reform of pension taxation in favour of a flat rate top up from the Government set at 30 percent. Contributor Tom McPhail, Head of policy – Hargreaves Lansdown
The report also proposes a package of interventions, including: Giving individuals the right to continue contributing to a pension after leaving employment; Extension of the planned pension dashboard to become a ‘money dashboard’; The creation of ‘side-car’ short-term savings accounts alongside pension auto-enrolment; Promoting sick pay income protection insurance and the creation of a body to promote financial security for the self-employed.
Tom McPhail, Head of policy, Hargreaves Lansdown: “The government has unfinished business with pension tax reform. The idea of moving to a flat rate is well-tested and would garner support in many quarters. However pension taxation is notoriously complicated and any move to reform the central pillar of the system would necessitate a more comprehensive review of the multitude of quirks and wrinkles which bedevil pension planning. I’m not sure the government has the appetite for that right now.”
“The inertia which has made auto-enrolment such a success also causes significant engagement challenges. Once someone has a pension they should be allowed to keep it from job to job, with the right to ask a new employer to pay money into an existing arrangement. Most self-employed people start their working lives in employment so we have a crazy situation where they are being enrolled and then the pension system lets them go. By putting individuals in control of their own pension we would incentivise pension providers to look after them and keep them engaged when they go self-employed.”