New figures from the Office of National Statistics (ONS) have revealed a significant drop in the number of self-employed people who are saving for their retirement, stoking new fears of a looming pension deficit.
Just one quarter (25 per cent) of self-employed people in the UK are actively contributing to a pension, down from 40 per cent in 2008.
There are believed to be more than 4.8 million adults in self employment in the UK, suggesting that approximately 3.5 million are not investing into a pension pot. Furthermore, almost half of all self-employed workers between the ages of 35 and 54 have no pension savings at all, with 30 per cent of over-55s in the same position.
By contrast, only 16 per cent of employed workers aged between 35 and 54 have no pension savings, thanks in part to the success of auto-enrolment.
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“Pension contribution rates are crashing among the self employed, who make up more than 15 per cent of the UK’s workforce,” said Sean McCann, chartered financial planner at NFU Mutual.
“It’s a worrying trend. While auto-enrolment is making it easier than ever for employed people to save for their retirement, many in self-employment put off saving into a pension in favour of investing in their own business.
“These latest statistics suggest many self-employed people may be missing a trick and could be facing having to extend their working lives by years, if not decades.”
In October 2016, the government appointed Matthew Taylor, chief executive of the Royal Society of the Arts, to lead a review into modern employment issues, including the issue of falling pension contributions among self employed workers.
The Taylor Review has made a number of recommendations on how to protect self-employed workers, but the government has been criticised for failing to prioritise the issue of pension reform.
“In the UK pension provision is largely delivered through the workplace, via auto-enrolment, so the self-employed, including gig-economy workers are currently excluded,” said Aegon’s head of pensions Kate Smith.
“The right to an employer contribution should be carved in stone for all workers.
“[The] government needs to grasp the nettle and address this growing savings gap before it’s too late.”