Self-employed workers who don't have £10,000 in pension face 'automatic' enrolment
The level of pension participation amongst the self-employed has fallen “dramatically” over the past 25 years, "collapsing" from 60 per cent in 1998 to 20 per cent since 2013, it has been warned. Pension participation for the self-employed has remained stuck at "very low levels" in the decade since.
The Institute for Fiscal Studies (IFS) says that 500,000 self-employed people in the UK earning more than £10,000 are paying a single penny into their pension pot while 1.8million are not. 20 per cent of self-employed workers are earning over £10,000 saving in a private pension, compared to 80 per cent of employees earning over £10,000. IFS senior research economist, David Sturrock, said: “Policymakers have two key options to help the self-employed save for retirement. Both build on the fact that self-employed people have to fill in a tax return at the end of each year.
“Using that system, the government could either get the self-employed to make an active choice over whether to save into a pension or lifetime ISA, or enrol them automatically into a long-term savings plan, which they could opt out of. “Either way would reduce the hassle cost that self-employed people face when looking to save for retirement.”
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Abrdn Financial Fairness Trust, Mubin Haq, said: “The self-employed make up an increasing share of the UK’s workforce but far too many are on track to have a poor retirement. More than half have no private pensions savings. Auto-enrolment was a sea-change for employees, rapidly increasing the numbers saving into a pension. We now need to use similar methods for the self-employed to actively nudge them into thinking about their financial futures.
“Changes to retirement savings take a long time to bear fruit so there is an urgency to ensuring action is taken sooner rather than later.” Standard Life retirement savings director, Mike Ambery, said: "The issue of pensions adequacy is in the spotlight and the self-employed are an often overlooked group when it comes to pension policy, which overwhelmingly focuses on saving through an employer.
"As today’s report points out, the long-term outlook for the self-employed is a source of concern and finding interventions that prompt people to make active decisions about their level of savings is to be welcomed. The path to retirement for the self-employed will often look very different to that of employees, and ensuring their needs and circumstances are taken account of will be an important element of the government’s pension adequacy review later this year.”