Kate Smith, head of pensions at Aegon comments on the research: “The self-employed represent a big gap in an otherwise improving pensions landscape. Auto-enrolment has nudged many people who were not saving for retirement in the right direction, but the self-employed are effectively excluded.
“How to support what is a diverse and growing workforce including everyone from plumbers to accountants continues to be a challenge for policy makers.
“Unsurprisingly, a key barrier for some self-employed is low and variable income, coupled with cashflow challenges. This means many are prioritising making ends meet, paying bills and investing in their business. Against this backdrop, the flexibility to decide how much to pay in month on month, year on year into a retirement savings vehicle is essential. Pension funds offer valuable tax incentives but are not accessible in emergencies before age 55, meaning for many self-employed, saving for retirement might best involve a combination of pension and more accessible savings products such as ISAs.
“With only a quarter saying that they contribute to a pension and more than half seeking some guidance on how to best save for retirement, it’s time to take this seriously.
“We believe that building on the nudge principles from auto-enrolment combined with the digitalisation of tax have a role to play in building solutions for the self-employed. Paying tax more frequently could act as a prompt for people to consider their savings at the same time.
“Continuing to use existing workplace pensions is also a solution. With 44 per cent of self-employed people aged between 50 and 65 it’s highly likely they will have been employed before and therefore have saved into one or more workplace pensions. These have the potential to offer the flexibility that the self-employed need.”
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