CPS fellow Michael Johnson has criticised the Taylor review for “stopping short” on making specific recommendations for people working in the so-called gig economy, including the self-employed.
In his latest Centre for Policy Studies (CPS) paper, Reinforcing Automatic Enrolment, Johnson (pictured) has set out 12 proposals for auto-enrolment (AE) intended to help low-earners and the self-employed in particular, as well as to maintain low opt-out rates and to save the government at least £10bn a year.
He said the proposals were also meant to help young savers and employers. The paper has been published ahead of the Department for Work and Pensions’ auto-enrolment review outcome, which is expected later this year.
In other comments further on in the paper, however, Johnson suggested the Taylor review – which was published earlier this week and proposed the self-employed should be auto-enrolled though a self-assessment tax process – did not go far enough.
“Matthew Taylor’s review of the gig economy stopped short of making specific recommendations on pensions savings for those working in the sector,” he said.
“Instead, the recommendation to ‘explore ways to improve pension provision among the self-employed, making the most of opportunities presented by digital platforms,’ passes the issue back to the AE review.”
Among Johnson’s 12 proposals was the suggestion the government lower the minimum age for auto-enrolment to school leaving age.
He said: “The minimum age of 22 for auto-enrolment is arbitrary, serving no consumer purpose. It should be lowered to school leaving age so apprentices, for example have an opportunity to start receiving employer contributions and accumulating savings early.”
Johnson also elaborated on proposals made in his previous papers on savings and pensions.
For instance, he has previously suggested scrapping pension tax relief. In this latest paper, he added that income tax relief and national insurance rebates should be replaced with a 50% bonus on the first £2,000 of post-tax pension contributions and 25% on the next £6,000. This would mean an annual bonus cap of £2,500, paid irrespective of tax status.
Johnson also commented on the idea of raising the minimum AE contribution rate by one percentage point to 9% of total earnings and reiterated his proposal to allow contributions to be made into a workplace ISA that would be combined with the lifetime ISA (LISA) to make one savings vehicle to “serve until death”.
As part of this, Johnson suggested the ISAs be regulated in the same way as defined contribution pension schemes, including a charge cap. This would include them having the same inheritance tax treatment as pension pots and being excluded for means-testing purposes.
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