You are here: Home - Household Bills - News -

Pension ‘crisis’ for self-employed as half aren’t saving for retirement

Written by: Rebecca Goodman
Self-employed workers could be missing out on vital financial protection as 45% aren't currently saving into a pension, data reveals.

Of those, 15% don’t have a private or personal pension and 30% who do have a pension are not currently paying into it.

The main reason given as to why people are not saving for retirement is due to other financial priorities (34%), while a quarter said they simply can’t afford to.

For one in four, they stopped paying into a pension when they became self-employed.

Unlike PAYE employees, self-employed workers are not eligible for automatic enrolment into workplace pensions or for contributions from an employer.

The finding from IPSE (the Association of Independent Professionals and the Self-Employed) and financial planning consultants CMME Contractor Wealth reveal the ‘latest sign of a worsening outlook for the retirement plans of the self-employed’.

By comparison, back in 2021, its research revealed 14% of self-employed professionals were not saving for later life in any way.

Other barriers to saving into a pension included reaching the maximum tax-free limit and not being able to keep an existing provider when taking on a new role; especially when operating through an umbrella company.

Of those who do have a pension, the average amount being put away is 19% of a worker’s annual income, while 35% said they were putting 20% or more away for their retirement.

Savings other than in a pension

Just 3% of the 502 people polled reported that they don’t use any savings products which the firms said indicated that the majority of freelancers are saving into savings products other than pensions.

“It is therefore evident that pension products need to be more tailored to the self-employed, offering greater flexibility for those choosing to work for themselves”, they said.

IPSE is now calling for the Government to tweak the way Lifetime ISAs work, to allow those over the age of 40 to open one as an alternative for a pension.

It also wants a Government review into the state of self-employed savings.

‘Crisis is too big to ignore’

Andy Chamberlain, director of policy at IPSE, said: “Successive Governments have ducked the issue of self-employed savings for years, but the crisis is now too big for a future Government to ignore. It will likely require intervention of a magnitude similar to automatic enrolment for employees.

“Pensions aren’t the only option for those saving for later life. Some self-employed people may find other methods of saving more attractive, if they were better suited to volatile incomes; the Lifetime ISA is one example, and IPSE has called for it to be revamped to better serve independent workers.”

Mike Coshott, chief executive officer at CMME Contractor Wealth, said: “Today’s findings are a disturbing reminder of the crisis in later life saving facing the self-employed, which shows no sign of abating amid increasing pressures on the cost of living.”

“Self-employed professionals naturally want to ensure that their businesses have the capital they need to function and grow, but it’s essential that they don’t overlook the need to set money aside for later life in the process. Consulting with financial professionals who understand the unique pressures of self-employment can make this a much less daunting task.”

Related Posts

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Big flu jab price hikes this winter: Where’s cheapest if you can’t get a free vaccine?

Pharmacies, supermarkets and health retailers are starting to offer flu jabs ahead of the winter season, but t...

Is now the time to fix your energy deal?

Fixed energy tariffs all but disappeared during the energy crisis. But now they are back with an increasing nu...

Everything you need to know about the pension triple lock

Retirees are braced to receive another bumper state pension pay rise next year due to the triple lock mechanis...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

The best student bank accounts in 2023: Cash offers, tastecards and 0% overdrafts

A number of banks are luring in new student customers with cold hard cash this year – while others are compe...

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Money Tips of the Week