Self-employed workers should be given the freedom to access their pension contributions in a bid to encourage saving, a new report has suggested.
Think tank, Demos, has released the details of its ‘Going It Alone‘ report which studied the sudden rise in self-employment. As one in seven people are now self-employed, it’s important that these workers are receiving as much support as those who are employed by others.
The Office of National Statistics (ONS) recently revealed that from March to May 2013 and March to May 2014, the number of people who are self-employed increased by 404,000 to reach 4.58 million.
While the number of freelancers is on the rise, only 30 per cent actually contribute towards a pension, compared to 51 per cent of employed staff. This difference may be due to the fact that salaried employees tend to have a much more predictable income.
Demos has proposed that self-employed workers should be given the flexibility to withdraw a part of their pension contributions from the last two years. Not only would this bring a greater sense of trust in pension schemes, without feeling that the money has been essentially ‘locked away’, but it would reduce the risks that saving can bring.
Research director of Demos and author of the report, Duncan O’Leary, highlighted the differences between the employed and self-employed: Employees already benefit from employer contributions and the ‘nudge’ of auto-enrollment into company pensions. The self-employed have neither of these advantages.…
The report also called for a new maternity/paternity allowance which freelancers would be able to opt-in for. This would award those who contribute to cover the cost of time off work if they have a child. Interestingly enough, the ONS also reported a 4.1 per cent increase in self-employed women since the last quarter, going from 1,387 to 1,445 which may be due to the flexibility that freelancing offers in regards to family life. If this is the case, the suggestion made by Demos is particularly relevant.
As so many people are now working as self-employed, it is clearly extremely important that this particular part of the economy is protected.
Simon McVicker, director of policy and external affairs at IPSE, the Association of Independent Professionals and the Self-Employed added: The policies outlined in this report will help to unlock the potential of our sector and the British economy will reap the rewards for years to come.
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