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Taylor review backs Aviva and Royal London's pension proposal

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Taylor review backs Aviva and Royal London's pension proposal

At an event hosted by Royal London and Aviva last week the two providers put forward their solution to get more self-employed people saving into a pension.

The idea of using self-assessment tax returns to automatically enrol the self-employed into pensions was supported by Matthew Taylor, the man appointed to lead a government review into modern working practices. 

In fact Taylor apparently liked the idea so much that he joked he needed to rush back to include the proposal in his report.

He clearly got back in time because the suggestion was included in the Taylor review of modern working practices, published today.  

‘When the individual provided HMRC with their selfassessment, as well as providing funds to cover income tax and NICs liability, they could also be expected to provide 4% of income towards a pension unless they choose to opt out,' the report said.

'For those who already pay 4% or more into a private pension, this would be treated in the same way as it is now. A similar approach is set out in the final section of Solving the under-saving problem among the self-employed, an analysis by Aviva and Royal London in June 2017.'

Department for Work and Pensions (DWP) and Treasury officials were also in the audience at the event last week, suggesting the government agrees with Taylor about the need to encourage more people to save into a pension. This was a pledge in the Conservative manifesto this June.

How, not if

Jamie Jenkins, Standard Life's head of pensions strategy who is one of the chairs of the DWP’s auto-enrolment review on coverage, said recently it is a question of 'how, not if' with regards to getting the self-employed saving for retirement.

However the challenge facing the government is that anything that might be considered a tax increase on the self-employed will be challenged. 

At the Spring Budget, chancellor Philip Hammond was pushed into a U-turn on the rise to NICs for the self-employed. Hammond initially said the policy was a reflection of the increased state benefits the self-employed receive because of the new state pension introduced last year.

The toxic memory of the NICs u-turn has not been forgotten, and even though the government is no longer bound by its previous manifesto pledge, an announcement of a NICs self-employed increase could prove a risk for this government.

As Taylor said last week the issue the government faces is ensuring ‘legitimacy’ in its policies.

‘Notwithstanding the government hasn’t got a majority, one thing we know about policy is that successful public policy is the importance of legitimacy. What we saw in the Budget was the argument about a more sustainable and more fair tax arrangement on the one hand and the need for us to think more seriously about how to support the self-employed was not something people understood. We have a responsibility to try and take that argument out and explain it to people.’

It is clear the government is trying to use the Taylor report to achieve legitimacy with its efforts to reform the self-employed system and how it gets the them into auto-enrolment. The question is whether or not the government has already closed the door for themselves with announcing the NICs increase ahead of the Taylor review. 

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