Self-employed workers ‘heading towards a pension saving crisis’

A recent report shows that self-employed workers are heading for a less comfortable retirement with many not planning to stop work.

Prudential’s nationwide survey revealed that more than two fifths (43%) of those working for themselves admit they do not have a pension, compared to just four per cent of those in employment – a key reason is that 36% of the self-employed say they cannot afford to save for retirement.

Self-employed workers are most definitely savers – but the research found they are more focused on day-to-day emergencies than the long-term of retirement. For example, 64% of the self-employed save to build up a safety net in case of an emergency in comparison with 57% of those in employment.

Kirsty Anderson, retirement income expert at Prudential, commented, “Saving for retirement is tougher when you are self-employed as there is no one to organise a pension for you and no employer making contributions on your behalf.

“On top of that self-employed workers often don’t have a regular income so many will focus on setting aside money as a safety net if they cannot work.

“Saving for a pension is still important as no one wants to work forever and no matter what your employment status, having money to fund your retirement is essential as the State Pension is unlikely to be enough to fund a comfortable retirement.

“If you are unsure how much you can afford to save into a pension, speak to a financial adviser as they will be able to help you with all aspects of your financial planning.”

The Association of Independent Professionals and the Self-Employed (IPSE) responded to Prudential’s report:

Simon McVicker, IPSE’s Director of Policy, said, “The sheer volume of self-employed people failing to save for later life is, indeed, an extreme concern, but now there is a real opportunity for both government and the pensions industry to avert this crisis.

“Auto Enrolment (AE) is not the answer, however. While the policy has been a success in boosting the number of employees paying into a pension, IPSE’s research found that it simply isn’t a viable solution for the self-employed. There is no employer to enrol them and it also reduces their ability to be flexible and in control of their money – two of the central attractions of self-employment.

“Instead, we support rolling out a sidecar pension scheme, allowing the self-employed to save for later life and also into a separate ‘rainy day’ fund for emergencies.

“Self-employment is a positive and rewarding career for many millions of individuals and adds significant value to the UK economy every year. However, it is import that we put into place measures that protect those who are unable to save for later life, and thus alleviate the already dangerous over-reliance on the state pension.

“Women, Millennials and those new to self-employment face a particularly bleak future and the worrying prospect of pensioner poverty if the crisis isn’t averted. Both industry and policy makers now have the opportunity to develop feasible and forward-thinking solutions to give long-term peace of mind to the burgeoning self-employed workforce.”

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