Report urges pension overhaul for self-employed workers

A new Harmonic Financial Planning report is pressing Chancellor John Healey to widen workplace pension reform at next month’s Budget, including an auto-enrolment-style system for the self-employed. The proposal targets millions of workers who are saving too little for retirement and says the existing system is leaving too many people reliant on the state pension.

Why it matters: - More than 4 million self-employed workers are outside auto-enrolment, leaving a large part of the UK workforce without regular workplace pension saving. - The report says retirement under-saving is now a national problem, with 15 million working-age adults saving too little and a 48% pensions gender gap in late-life private wealth. - Harmonic Financial Planning says the current system is leaving “a generation of forgotten savers” exposed to a retirement income shortfall.

What happened: - Harmonic Financial Planning published the Faces of Retirement report one month before the Budget and urged Chancellor John Healey to launch a “second wave of workplace pension reform.” - The report calls for an auto-enrolment equivalent for the self-employed and measures that push existing pension savers to contribute above minimum levels. - The report also points to the policy role of James Purnell, who helped create auto-enrolment under the Pensions Act 2008 and is now chief of staff at 10 Downing Street.

The details: - The UK has more than 4.5 million people in some form of self-employment. - The share of self-employed workers saving for retirement has fallen from 32% in 2005 to 17% today. - Among workers earning solely from self-employment, the saving rate has dropped to 4%. - Research cited in the report suggests an auto-enrolment equivalent could lift self-employed participation in workplace pensions to as high as 97%. - The report says 15 million working-age adults are under-saving because many assume minimum auto-enrolment contributions are enough to meet retirement goals. - The minimum contribution is described as a floor, not a ceiling. - Median private pension wealth in late 50s is £156,000 for men and £81,000 for women, a gap of 48%. - John Ditchfield, founder and CEO of Harmonic Financial Planning and author of the report, says the self-employed include company directors, contractors, freelancers and gig-economy workers. - Ditchfield says the self-employed workforce is larger than the combined populations of Manchester and Glasgow. - Ditchfield also says the Government should convene a working committee with pension providers, industry leaders and other stakeholders to redesign auto-enrolment. - Ditchfield says Making Tax Digital could be used to nudge self-employed workers quarterly toward regular pension contributions and better advice. - In response to the end of the pension triple lock from 2030, Ditchfield says the policy has become unaffordable and adds about £16 billion a year versus linking pensions to earnings alone, citing the IFS. - Ditchfield says businesses, entrepreneurs and the self-employed feel they get a raw deal from the pension system. - Ditchfield says the UK pension industry should do more to improve understanding of saving choices.

Between the lines: - The report frames self-employed pension saving as the biggest gap in the current auto-enrolment model. - The push for higher contributions suggests policymakers may face pressure not just to expand access, but also to address adequacy. - Linking the proposal to Making Tax Digital signals an effort to use existing tax systems rather than build a wholly new pensions infrastructure.

What's next: - The report wants the Chancellor to make workplace pension reform part of next month’s Budget. - It calls for the Government to start work on an auto-enrolment equivalent for self-employed workers. - It also wants action to raise contribution rates, reduce gender gaps and improve pension advice for workers already in schemes. - The broader policy debate is likely to intensify as the end of the triple lock from 2030 comes into view.