First let’s define “entrepreneur”. It is not defined by the small band of named celebrities who are delivered to us through TV shows like Dragons Den and the Apprentice”. Entrepreneurs to me are the people who decide to make their own way home and not rely on getting a job.

Because they make their own jobs, they make work for others and this forms regeneration in the economy. Without this regeneration, we would have to work at the pace of the mega corps, innovation, productivity and growth would suffer. So my definition of entrepreneur is anyone who  works outside the mainstream. By this definition, we cannot expect entrepreneurs to conform to mainstream habits of saving.

But we do. The FT is concerned

A report this week from pension provider Scottish Widows found that four in 10 self-employed people are not on track for even a minimum standard of retirement lifestyle — which, according to the Retirement Living Standards, based on research by Loughborough University, is £14,400 a year for a single person.

Putting aside the obvious point that 10 out of 10 self-employed people qualify in full or mainly for a state pension there is a wider point here. Self-employed people do not get very excited about saving into a personal pension. Jackie Lieper runs Embark, which is quite a progressive outfit looking to improve personal pensions for (among others) the self-employed. She tells us

Sic

Jackie is many things, but she is not self-employed. It is quite hard to get inside the head of the self-employed if you work for a big-four bank with a career path that provides you with an income to retirement (and if the Pension Bill becomes an Act) a lifetime income beyond.

The self-employed are not blind to their or their family’s  futures, they think about little else. But they are all-in on their business as the means to deliver. Taxing the business to divert money into a personal pension is quite the opposite of “productive finance” for the self employed. About 20% of them have personal pension plans, but I cannot imagine many entrepreneurs do not have plans for later life.

The problem is not with the entrepreneur but with the pension

There are three things that I would like to change so that entrepreneurs have pensions

1. Self-employed pensions should be considered “workplace”
2. Participating in self-employed pensions should unlock doors to equity and debt finance
3. The mechanism for saving should be aligned to banking and not to occupational pensions

Self employed pensions are workplace pensions

I hope that the entrepreneurs who initiate growth in the economy will be regarded as central rather than peripheral to the Government’s workplace pension review. They should be subject to the same rules of eligibility and entitlement as any other workers and the national insurance system should be adapted to include them in the opt-in/out process,

I hope this will be in the second part of the pension review announced by Reynolds and Reeves last week. The self-employed are different but they deserve the same opportunities to benefit from Government incentives as anyone else. The current system of workplace and non-workplace pensions is (at least for those who work) a nonsense.

Access to debt and equity finance

Borrowing money or exchanging shares for working capital, is a critical activity for most entrepreneurs. They read that pensions are a source of productive finance for start-ups and scale-ups, but they get nothing out of being a member of a personal pension (other than reduced capacity to borrow and get equity funding).

Let’s look at turning this on its head. I suggest that as part of the National Wealth Fund, money is set aside so that those invest in pensions , can access debt and equity pools within the National Wealth fund , administered by the British Business Bank and that the contributions made into the personal pension create a return based on the performance of the debt and equity.

Being part of a pension scheme need not divorce the saver from the savings. I am not suggesting pensions become a revolving credit facility, but I can see a way to allow pensions to become as integral to the finances of an entrepreneur as they are to Government.

A saving and spending mechanism aligned to modern banking

I have had the pleasure in the past few months of getting close to Eduardo and Riccardo of Collegia. They are respectively a banker and a technologist who have set up a personal pension that talks to its 20,000 users using AI, offers interfaces that look like Monzo, Revolut and Starling and provides a service that isn’t benchmarked against personal or occupational pensions but against the expectations of people used to using digital banking and payments.

Its customers are small businesses and the self-employed. It is already providing a mechanism for the entrepreneur to manage his or her pension in his or her pocket.

I have my pensions managed by Nest and L&G and my banking by First Direct, Starling and Revolut. I have different needs in working with my overseas contractors (Revolut), my UK suppliers and customers (Starling) and my personal finances (First Direct). I would like to think myself an entrepreneur but Nest and L&G are of no help to my business whatsoever, their main merit is in storing my wealth till I can convert it to pension.

Frankly the interfaces i have with my pensions are not fit for purpose when it comes to the way I work. The self-employed deserve a better mechanism to save with.

Returning pensions to the self-employed

Back in the days of the self-employed retirement annuity contract (s226), many partnerships required their partners to commit a proportion of their earnings into a pension savings plan which guaranteed an annuity. These plans were popular in the twentieth century but failed with the Equitable Life.

The point was that the failure was not with the self-employed, who used these contracts, but with the providers, who did not level with those using them that the benefits weren’t properly guaranteed.

Hopefully we have learned lessons since than and can find ways to make pensions relevant again to the entrepreneurs who need them.

In this article, I hope I’ve ignited in you, an interest in developing new ways to help people save, invest and use their pensions to provide security in later life – whether they are in the mainstream workforce or the marginal areas where the self-employed entrepreneur makes his or her living.

We need to find new ways to work with the entrepreneurial worker and that does not mean shoe-horning them into personal pensions that do not fit the way they work today.