Round Up Spring 2019

technical matters

Encouraging retirement planning amongst the self employed

The Department for Work and Pensions (DWP) has announced trials aimed at stimulating retirement saving among Britain’s 4.8 million self-employed. New approaches that would allow self-employed people, around 15% of the UK workforce, to save for short, medium and long-term financial goals (for example, catering for those with irregular incomes) will be tested through trials and research to be launched imminently. Automatic enrolment has transformed pension saving with almost 10 million people automatically enrolled since 2012. Now, the government is looking at methods of encouraging the self-employed to put away money for later life.

The trials focus on three areas: • Marketing interventions aimed at people who have previously saved (for example, after being automatically enrolled whilst employed) to encourage them to continue their saving behaviour. • Marketing interventions using trusted third parties for the self-employed (such as trade bodies/unions etc.) to promote the value of saving and provide an easy connection to an appropriate savings vehicle, and • Behavioural prompts – testing messages combined with prompts through invoicing services and/or the banking sector to seek to engage self-employed people to think about starting a regular saving habit at a point when they are receiving income. More information about these trials is available from the gov.uk website. Search: pensions and long-term savings trials for self-employed people.

What is CDC and howmight it work in the UK? The Pensions Policy Institute (PPI) has published a report exploring the defining features of Collective Defined Contribution (CDC) schemes, as well as the potential benefits they may offer and the hurdles they are likely to face in design and operation. CDC schemes could offer a middle ground between Defined Contribution (DC) and Defined Benefit (DB), providing members with greater certainty about the retirement outcomes they will achieve than would be possible in a DC scheme, while providing greater certainty about costs for employers than a DB scheme. Despite the fact that CDC has been discussed several times in recent years as a possibility for the UK, there’s still some uncertainty about how it would work in practice. This research seeks to demystify CDC and the considerations that are likely to be important as it develops in the UK.

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