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DWP pilots auto-enrolment plans for self-employed

The team behind the Penfold self-employed pension app
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Two pilots have been announced by the Department for Work and Pensions to test new forms of auto-enrolment pension savings plans that keep the variable income of the self-employed in mind.

Nest Insight, a public-benefit research and innovation hub, is collaborating on two research trials: one with Penfold, a fintech pension provider; and one with Moneyhub, an open data and payments platform. These new pilots are supported by the Department for Work and Pensions as part of a multi-year programme of work testing ways to help self-employed people save for retirement.

Auto-enrolment has greatly expanded participation in workplace pension saving. Yet certain groups are not benefiting from the system, including self-employed people. In the UK, around 4.3 million are in some form of self-employment, but it’s estimated that only 16% of them are actively saving into a workplace or personal pension. This compares to 88% of the working population eligible for auto-enrolment through their employer.

The pilots will test different forms of flexible savings solutions and ‘nudges’. These approaches could be introduced into the online tools that self-employed people already use to manage their work and finances. The solutions being trialled include:

  • supporting people to save a percentage of their income
  • nudging people to save at relevant moments, for example when they receive a large payment
  • nudging people to save some of the difference between monthly income and expenditure in months when income is higher
  • giving people the choice to connect different kinds of savings vehicle to save into for the future.

The outcomes of the pilots will be analysed by Nest Insight and publicly shared next year.

“Automatic enrolment has succeeded in transforming pension saving with more than 10 million workers enrolled into a workplace pension to date, and it is important that the self-employed are not left behind,” said Guy Opperman, Minister for Pensions and Financial Inclusion.

Pilots such as these are vital in understanding how to better help self-employed people achieve the retirement they want. We have worked with Nest Insight to ensure a variety of flexible saving options are tested and I look forward to reviewing the outcomes.

Guy Opperman, Minister for Pensions and Financial Inclusion

Chris Eastwood, Co-founder and Co-CEO of Penfold said:

The pensions industry has been slow to respond to changes in how people live and work today and, with the number of self-employed on the rise, it’s critical we factor their needs and saving preferences into all our future products and services.

The pandemic has been particularly hard for the self-employed to endure, so helping them to find the capacity to save each month and to easily sweep money to their preferred savings vehicle, is both timely and important, according to Samantha Seaton, CEO at Moneyhub.

To help support their members, Community Trade Union will be sharing information with their membership about the flexible savings approach being trialled by Moneyhub.

Kate Dearden, Head of Research, Policy and External Relations at Community Trade Union, said:

The traditional pensions system that requires people to save a fixed amount each and every month isn’t designed with self-employed people in mind and doesn’t work for them because of this. The proportion of self-employed people paying into a pension is now at a record low.

“Our members tell us that they want more support in saving for retirement. To meet the needs of self-employed people to ensure they don’t face destitution in retirement, pensions solutions need to be flexible and adapt to changing circumstances to enable people to save when they can.

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