According to recent figures, 43% of self-employed people in the UK do not have a private pension compared to just 4% of those in employment. The report, by Prudential, also found that of the 4.8million people working for themselves, nearly a third plan to rely solely on the state pension with a fifth thinking saving for a pension does not apply to them.
Stuart Price, Partner and Actuary at pensions and benefit experts Quantum Advisory, admits the figures are alarming, and something needs to be done to stop a future pension crisis for this sector of the workforce.
“Technology has made the option of self-employment more accessible, but it certainly comes with challenges. Working for yourself means managing all your finances; from your accounts, invoices, taxes, expenditure – and often your pension is overlooked. Many self-employed people do put money away, but this is more as a safety net in case of a quiet period or unexpected outgoings, not enough are looking further ahead to old age.
“Although very worrying, the latest statistics are not surprising – and the government should take some blame for this. The auto-enrolment scheme has been hugely successful in encouraging the majority of workers to pay into a workplace pension, but unfortunately the self-employed are excluded from this.
“One solution to increase the number of freelancers saving could be to offer further tax breaks when investing into a personal retirement plan to balance out the current inequalities. Education is also key. Start teaching people about their pension at school so everyone – whether they end up self-employed, running their own company or in the mainstream workforce – knows they can’t rely on the state and what they need to do to fund a comfortable retirement.”