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Pensions minister Guy Opperman has said the government will consider a ‘sidecar’ option for early pension release as he plans to push ahead with auto-enrolment for the self-employed.
The Conservatives' manifesto proposed auto-enrolling the self-employed into pensions, and speaking at the party’s conference this week, Opperman said ‘there is no doubt’ the government would deliver on the plans.
He added the government would also look at a ‘sidecar’ option to allow these self-employed workers to have access to a certain percentage of their savings before they retire.
At the fringe event, issues around auto-enrolling the self-employed were discussed.
A research paper commissioned by Old Mutual carried out by the Pensions Policy Institute (PPI) found that of the 4.8 million people who are self-employed, only 2 million would be subject to auto-enrolment.
This was because they did not meet the earnings thresholds as many of them worked part time or held multiple jobs, or fell outside the age thresholds.
The report also raised the issue of opt-out rates for the auto-enrolled self-employed due to the volatility of their incomes.
One of the options the report presented to address this was a pensions sidecar which would see contributions split between a pension and a ‘rainy day’ fund and could be accessed before retirement. This idea is also going to be trialled by the government-sponsored savings scheme, the National Employment Savings Trust (Nest).
Opperman said this idea of a sidecar was ‘interesting’ and ‘is in the mix with all the solutions’ as the Department for Work and Pensions (DWP) carries out its review of auto-enrolment, expected to be completed by the end of the year.
Old Mutual’s head of retirement policy Jon Greer said the sidecar proposal would get away from the ‘either or’ nature of pension saving.
‘Having some form of liquid saving there that gets over this concern about locking away your money is a good idea. And having pots of separate money for different things is quite a powerful driver for savings,’ he said.
‘Having a sidecar is a method to having some liquid saving people can fall back on but also getting them into the mechanism of saving into a pension as it’s a long-term commitment.’