Pensions - Articles - Data paints harrowing retirement outlook for self employed

Comment from Jon Greer, head of retirement policy at Quilter on today’s ONS report on ‘Saving for retirement in Great Britain’: The ONS report on paints a rather harrowing picture of the retirement outlook for a vast number of people and highlights the disparity in retirement savings across the nation, with a particular lack seen in those who are self-employed.

 “While it comes as little surprise that self-employed generally have lower levels of pension savings, the fact that just 20% of self-employed people were paying into a pension between April 2018 and March 2020 shows just how dire the situation is. Comparatively, 80% of employees were paying into a pension, largely thanks to auto-enrolment which the self-employed are unable to benefit from. Worryingly, the gap between employed and self-employed groups paying into private pensions has actually widened since 2006 which highlights the lack of provision.

 “What’s more, given this latest data covers to March 2020, it is likely that the results are more positive than would be the case had the impact of the pandemic been factored in. Just prior to the pandemic, the self-employed made up about one in seven of the workforce. It is likely to have dipped through the pandemic, but remains much larger than a generation ago driven by growth in self-employment in the decade after the financial crisis. The Institute for Fiscal Studies found that while employees have suffered from stagnation in their earnings, the self-employed have done much worse with incomes falling rapidly in the years preceding the pandemic. This may attribute to the fact that more self-employed say that they cannot afford to contribute to a pension relative to employees.

 “The issue surrounding pension provision for the self-employed has recently resurfaced, with the Work and Pensions Committee discussing the lack of support and the intervention needed to help fill the gap. While some trials have taken place over the years, such as the ‘sidecar’ savings model trialled to some success by Nest, there remains little effective support in place for the self-employed. Ultimately, we need to work to better understand the self-employed to ensure they have a stronger chance of financial security in later life and adjust our efforts as an industry based on this.

 “While the self-employed are certainly in need of greater support, this new data shows a concerning number of people feel ill-prepared for their futures as almost a third of people said they did not expect to have any pension provision beyond the State Pension when they retired. It is high time the industry renewed its efforts in helping people understand the need for strong retirement provisions to help them achieve the later life they wish to have.”

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