Self-employed workers face second-class retirement, ii report finds

interactive investor, the UK’s second-largest DIY investment platform, has launched a new pensions report exploring the realities, expectations and challenges self-employed workers face when saving for retirement.

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interactive investor’s Second-class retirement: the self-employed experience report, based on the finding of a survey of 718 self-employed people, suggests that many self-employed workers are teetering on the brink of a pension crisis with a substantial number lacking the financial means necessary for a basic retirement. 

Something must be done – and done quickly. interactive investor provides four policy recommendations to help solve the self-employed pension crisis.

You can download the full report here.

The survey was conducted on behalf of interactive investor by strategic insight consultancy Opinium between 29 July and 5 August 2024.

Key findings

Under pensioned:

• 38% have no pension savings at all, rising to 50% amongst under 35s cohort.
• Almost two fifths (37%) of self-employed people aren’t paying into a pension.
• 90% of self-employed workers aged 55 plus are off track for a moderately comfortable retirement, with less than £250,000 saved in their pensions.
• Six in 10have less than £10,000 in pension wealth.

Dangerously financially exposed: 

• Nearly a third (31%) of self-employed individuals have less than £1,000 in savings. 
• 15% have no cash savings.
• Half have less than £10,000 saved.

Women face greater financial challenges:

• 63% of self-employed women earn less than £30,000, compared to 38% of self-employed men. 
• 43% of self-employed women have no pension at all, versus 35% of men.

Working in retirement out of necessity:

• Over a third (35%) of those over 55 plan to continue working beyond their 70th birthday, driven by inadequate pension savings.
• Only 17% of over 55s intend to fully stop working when they retire.

Lack of financial advice and knowledge: 

• Only 23% of self-employed workers get financial advice, and just 30% of business owners. 
• Just one in ten self-employed workers could answer 3 simple pension questions, with 1 in 6 over 55s getting all 3 answers correct.

Four policy recommendations to help solve the self-employed pension savings crisis

1. Greater education and better signposting of existing pension guidance services like Pension Wise: providing clear, concise information can empower the self-employed to make informed decisions about their retirement planning.
2. Expand the Pension Wise service: we propose that the service is offered to self-employed people of all ages. Everyone should be automatically offered an appointment when they register as a sole trader, submit a tax return, or set up a business with Companies House. 
3. Auto-enrolment for the self-employed: we support calls for auto-enrolment for the self-employed, which could be instrumental to tackling the pensions crisis. We believe an ‘automatic opt-in’ model, activated through the self-assessment tax return, is a good option to consider. 
4. Pensions dashboards for the self-employed: developing and promoting pensions dashboards specifically for the self-employed would provide a clear, comprehensive view of their retirement savings, helping them track and manage their pension contributions more effectively.

Richard Wilson, CEO, interactive investor, says: “Our report makes it patently clear that many hardworking self-employed people are on course for a second-class retirement. The self-employed are essential to our nation’s competitiveness yet they are at a disadvantage when it comes to saving for their future. This isn’t right and needs to change. Policymakers have failed to address the unique challenges faced in saving for retirement when you work for yourself.

“It’s high time policymakers paid greater attention to this often-overlooked segment of the workforce. There needs to be a concerted effort to integrate self-employed workers into the pension conversation, offering them a comprehensive level of support and resources in the same league as what’s available to salaried employees. Without such reforms, the chasm between the pension haves and have-nots will only widen, undermining the principles of fairness and financial security for all.”

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Our report lays bare that many self-employed people are sleepwalking their way into retirement difficulty and potential poverty. The fact that 38% of the sample said they have no pension savings at all, with 15% claiming to have no cash savings at all, underscores the perilous financial position many self-employed workers find themselves in. It is unfortunately yet another area in which the gender disparity is stark, with women on more unstable financial footing.

“Compounding these issues is a glaring lack of financial advice. Only 23% of the self-employed receive guidance from financial planners or advisers, likely contributing to poor pension planning and a lack of informed decision-making.

“It means that the prospect of working into old age is becoming a grim reality for many self-employed people – born out of financial desperation rather than choice. Self-employed people aren’t homogeneous; they represent a diverse and multifaceted group spanning countless professions and industries.

“From freelancers and small business owners to independent contractors, each self-employed individual faces unique challenges and circumstances, especially when it comes to saving for retirement. Understanding this diversity is crucial for addressing their distinct financial needs and ensuring they have the support necessary to secure their futures.”