Just one in 10 self employed workers making pension contributions
As the number of people working for themselves has grown in last the decade – from 3.3 million registered as self employed in the 2001-02 tax year to 4.6 million in 2013-14 – those making personal pension contributions has dropped to its lowest level since 2001. Indeed in the 2001/02 tax year, one in three self employed workers (34 per cent) were making making personal pension contributions.
As a result, the total value of pension contributions made by self-employed people has fallen from £2.5bn in 2001-02, to £1.6bn in 2013-14.
According to Prudential this means that many of those who are enjoying the freedoms of self-employment are risking an inflexible future in retirement.
However, more encouragingly, the figures reveal that those who are making pension contributions have upped the amount by which they are doing so. The average annual pension contribution made a self-employed person has grown from just over £2,200 in 2001-02, to just over £3,800 in 2013-14.
Vince Hughes, a retirement income expert at Prudential, says: “There has been a fundamental shift in the way people work in recent years, with the number of self-employed workers increasing by nearly 40 per cent since 2001. But the step away from the security of salaried work also sees many workers giving up the benefits of company pension schemes and employer contributions.
““While we are seeing many more people in work benefiting from auto-enrolment into company pension schemes, those who don’t have the opportunity of joining such a scheme seem to be turning their back on saving for retirement. Irrespective of your employment status the same general rules apply for those looking to secure a comfortable retirement income – save as much as possible as early as possible in your working life and take professional financial advice.
“It is understandable that re-investing any spare cash into a business is a priority for many entrepreneurs, especially in the years immediately after setting up a company. However, every year that goes by without making any pension contributions is a year less for any savings to grow and help provide for retirement.”