UK: A blueprint for getting the self-employed into pensions

Major pension providers Aviva and Royal London have joined forces to produce a recommendation of how to extend auto enrolment to the self-employed.

The favoured solution by Aviva and Royal London is to use the annual self-assessment process to default the self-employed into pension saving. As part of completing an annual tax return, self-employed people could nominate a pension provider or scheme to receive any contributions and would have a sum automatically added to their total tax bill, perhaps equal to 4% of their taxable profits.  With standard rate tax relief this would mean 5% of profits would go into a pension unless the self-employed person actively opted out. The fact that the contribution would go up and down in line with the ups and downs of the self-employed person’s business would provide a flexibility which would be welcomed by many self-employed people.

The recommendation is made in a new report from Aviva and Royal London titled “Solving the under-saving problem among the self-employed". In 2014/15 only 1 in 7 self-employed people contributed to a pension, but there is now growing momentum to find a solution, including:

  • The Government’s 2017 review of automatic enrolment promised to “…consider how the growing numbers of self-employed people can be helped to save for their retirement”;
  • The Conservative manifesto (p64) said: “we will continue to extend auto-enrolment to small employers and make it available to the self-employed”.

The new report begins by describing current patterns of pension scheme coverage, showing that women and low-paid self-employed workers have particularly low levels of coverage.  It then reviews a range of policy options which have been recommended in the past, including government incentives to save or use of the Lifetime ISA instead of a pension.

Commenting on the report, John Lawson of Aviva said:

“The lack of retirement provision amongst the self-employed is reaching crisis levels. Whilst automatic enrolment has helped to reverse declining participation amongst employees, the situation for self-employed workers remains dire. Many will simply be unable to afford to retire unless urgent action is taken.”

Steve Webb, director of policy at Royal London, said:

“Automatic enrolment has shown the power of ‘nudges’ to get people saving. Using the annual tax return process to ‘nudge’ self-employed people into starting saving for their retirement could bring a breakthrough in pension coverage for the self-employed in the same way as has already happened for employees. It is vital that we build on the momentum for action in this area and take forward practical proposals as a matter of urgency.”

The Government’s independent reviewer of “Employment Practices in the Modern Economy”, RSA Chief Executive Matthew Taylor, will speak at the launch of the report. Matthew Taylor said:

“There are many areas in which self-employed people may miss out compared with employed earners, and access to automatic enrolment and an employer pension contribution is one of these. I welcome this report which suggests one practical way in which the existing system could be modified to improve pension coverage among the self-employed”.

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For further information please contact:  

Meera Khanna, Consumer PR Manager, Royal London  0203 272 5129 or 07919 170502

Ben Moss, Senior Media Relations Manager, Aviva   0117 928 5843 or 07827 832395

Notes to editors

A copy of the report Solving the under-saving problem among the self-employed can be found here:

About Aviva:

• Aviva provides life insurance, general insurance, health insurance and asset management to 33 million customers.

• In the UK we are the leading insurer serving one in every four households and have strong businesses in selected markets in Europe, Asia and Canada. Our shares are listed on the London Stock Exchange and we are a member of the FTSE100 index. 

• Aviva’s asset management business, Aviva Investors, provides asset management services to both Aviva and external clients, and currently manages over £340 billion in assets. Total group assets under management at Aviva group are £450 billion.

• Aviva helps people save for the future and manage the risks of everyday life; we paid out £34.4 billion in benefits and claims in 2016.

• By serving our customers well, we are building a business which is strong and sustainable, which our people are proud to work for, and which makes a positive contribution to society.

• The Aviva media centre at includes company information, images, and a news release archive.

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with Group funds under management of £104.5 billion. Group businesses provide around 9.0 million policies and employ 3,341 people. (Figures quoted are as at 31 March 2017)