Think tank’s call to let self-employed withdraw funds from their pension pots

Demos claimed that only 30 per cent of the country’s
self-employed workers contribute to a pension, compared
with over half of all employed staff.

A survey by the Office for National Statistics revealed recently that self-employment is at its highest on record, with 4.6m people self-employed in their main job.

Demos, which describes itself as “Britain’s leading cross-party think-tank”, proposes that self-employed people be offered the flexibility to withdraw, at any point, a portion of their pension contributions from the last two years. It has claimed that this would reduce fear of “locking money away” in pension schemes, when self-employment income is less predictable then employee salaries.

The report, called Going it Alone, argues that this greater flexibility would reduce the risks of saving for Britain’s growing army of self-employed.

Other recommendations include introducing a new opt-in maternity/paternity allowance for the self-employed and changing the tax system to allow self-employed people to class investment in training of new skills as tax deductable.

The Research Director of Demos and author of the report, Duncan O’Leary, said: “Saving rates for the self-employed are low and the gap is only likely to grow in the coming years.

“Employees already benefit from employer contributions and the ‘nudge’ of auto-enrolment into company pensions.

“The self-employed have neither of these advantages. In addition, income can be unpredictable for the self-employed, leaving many worried about ‘locking away’ money in pension schemes.

“The smart response to this is to give the self-employed more flexibility.”