Employees can simply save in a workplace pension without making any decisions at all.
Personal pensions also typically have higher fees than workplace pensions.
No wonder, today, only 20 per cent of self-employed workers earning more than £10,000 are saving into a private pension (500,000 out of 2.3mn). This compares with 80 per cent of employees earning more than £10,000, according to IFS research.
Yet in the mid-1990s, estimates by the Department for Work and Pensions suggested 62 per cent of self-employed men of working age were saving into a pension.
Crying in the wilderness
Pension prophets (including me) have been crying out in the wilderness for years about retirement doomsday scenarios for the self-employed.
Indeed, 10 years ago, two influential reports on Britain’s forgotten army from Royal London, and the Federation of Small Businesses – Going it alone, moving on up: Supporting self-employment in the UK – urged the government to act.
Indeed, Mike Cherry, then national chairman at the Federation of Small Businesses, told me in 2016: “In a whole range of areas, the self-employed are akin to round pegs in a system built of square holes. Their ways of working don’t fit with the support frameworks in place.
"Many are being shut out of financial services like mortgages or personal insurance because they don’t fit the usual mould.
"More must be done to support these workforce pioneers.”
Little has been done since.
At a personal level, in June 2013 in my Pensions World magazine editorial, I advocated at the very least HMRC auto-enrolling the self-employed into the National Employment Savings Trust.
More than 10 years on, the IFS, has now put some heft behind improving their lot.
It has several excellent policy suggestions. One is to require all self-employed individuals filling out a self-assessment tax return to make an active choice about the level of pension contributions to make at that point (with zero being an option).
Any contributions made would then go into either a nominated private pension plan, a government-chosen default pension plan or a Lifetime Isa.
“A second option would be a form of automatic enrolment, again through the self-assessment tax return, with HMRC selecting a pension provider if no decision was made by the individual,” the IFS says.
It cautions: “As defaults can be powerful, this should be limited to those with self-employment income above a certain trigger.”
One snag is that if HMRC is struggling to meet satisfactory performance targets on basics like even answering the phone, could it cope with this extra work?
It may say it is not its role – but if not HMRC, who else can manage this task?
Index link pension debits
More urgent and easily attainable for now is to reform auto-enrolment direct debit pension payments to default to an index-linked option in line with the consumer price index.
