POT LUCK
Budget 2018 pensions – boost for self-employed workers as Chancellor promises to review auto-enrolment
Millions of self-employed workers miss out on a nearly £450,000 windfall in retirement because they are not auto-enrolled into a pension
MILLIONS of self-employed workers could be in line for a boost to their retirement savings after the Chancellor promised to review auto-enrolment rules later this year.
The Department for Work and Pensions (DWP) will launch a paper this winter setting out the Government's approach to increasing pensions participation among the self-employed, today's Budget has revealed.
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This follows the 2017 review of automatic enrolment.
The Budget's "red book" stated that the Government will “focus on expanding evidence through a programme of targeted interventions and partnerships”.
Under the government's current auto-enrolment scheme, if you're aged between 22 and state pension age, employed in the UK, and earn at least £10,000 a year, you're automatically enrolled into your workplace's pension.
But millions of freelance and self-employed workers often miss out, with many choosing between contributing to a pension or investing in their business.
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As a result it is estimated that five million self-employed workers lose out on a nearly £450,000 windfall in retirement because they're not auto-enrolled into a pension.
Recent figures published by the Office for National Statistics revealed that the average amount self-employed people saved for a pension in the 2016/17 tax year was £4,490 - down from £5,310 the year before.
PENSIONS TAX RELIEF CHANGES AVOIDED FOR NOW
YESTERDAY the government swerved making changing to pensions tax relief.
For individual savers, further cuts in tax relief could prevent them from saving at all.
The fewer incentives available for pension saving, the less attractive they become, which could coerce a reduction in contributions and spur an epidemic of poor pensioners living out their retirement.
There have been six separate cuts to the annual and lifetime allowance alone since 2010.
For Catherine Morgan, 36, saving into a pension is common sense.
Catherine, pictured here at her home in Milton Keynes, said that she had been saving since her first job at the age of 19 despite not knowing what she was doing.
She said: "I’m so grateful that I started saving early, but at the time I had no idea about pensions and certainly wasn’t thinking of retirement. But the older I get, the more important it seems to me.”
Catherine, a mother of two and a financial planner, said that women are particularly vulnerable when it comes to pension saving.
“Women are living longer, yet we are the ones that take career breaks to raise children and look after aging parents, which means we are not saving as much as we should,” she said.
“But, I can’t see what the government can do to even this out.”
The Government will also launch a consultation on the pension dashboard, an "innovative tool" that will allow an individual to see their pension pots, including their State Pension, in one place.
The tool would be particularly useful for people who have several source of incomes or had several jobs over the recent years.
According to the Association of British Insurers (ABI), some 1.5 million lost pension pots worth nearly £20billion could remain unclaimed, with people often losing track of their savings due to job changes or moving house.
Kate Smith, head of pensions at Aegon, said: "With so many pension pots disappearing into the potholes of working life, we’re pinning our hopes on the Pensions Dashboard to solve the issue of lost pension pots.
Am I on track for a comfortable pension?
IF you are only putting in the minimum amount for your pension then you are not saving enough for a comfortable retirement. Here's how much you'll need according to consumer group Which?.
- Which? reckons that you need to be saving £131 into your pension a month from age 20 to be able to have a comfortable retirment.
- Anyone over 30 would have to save up to £198 a month.
- If you start at 50, you need to be saving a staggering £633 a month to be able to have a £26,000 a year income when you retire.
But these figures assume your employer pays his or her part of your pension contributions - so if you're self-employed you need to be saving even more each month.
“The pension dashboard is likely to lead to greater consolidation of small pension pots and we are waiting patiently for the government to publish its much delayed feasibility study which is key to the industry being able to move forward with developing the dashboard initiative.
“This funding indicates that things are moving in the right direction and the dashboard will become a reality soon.”
More on the Budget 2018
It was recently revealed that public sector staff will retire on pensions ‘THREE times larger than their private sector counterparts’.
On a more positive note, low earners will get a state pension boost after the government recently scrapped a tax break for the self-employed.
Don't let scammers trick you out of your pension.
Here are our tips to protect your pension from rip-off fees as victims lost £91,000 on average to saving scams last year.
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