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.
Richard Wilson, CEO, interactive investor
interactive investor’s Second-class retirement: The self-employed experience, 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.
Key Findings
Under pensioned:
- 38% have no pension savings at all, rising to 50% amongst under 35s cohort.
- Six in 10 have 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.
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.
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.
Read more about pensions
Learn how to make the most out of your SIPP (Self Invested Personal Pension).
Pensions and retirement news
Important information: A SIPP is for those wanting to make their own investment decisions when saving for retirement. As investment values can go down as well as up, the amount you retire with could be worth less than you invested. Usually, you won’t be able to withdraw your money until age 55 (57 from 2028). Before transferring your pension, check if you’ll be charged any exit fees and make sure you don't lose any valuable benefits such as, guaranteed annuity rates, lower protected pension age or matching employer contributions. If you’re unsure about opening a SIPP or transferring your pension(s), please speak to an authorised financial adviser.