Just 25% of self-employed contribute to a pension

Written by Natalie Tuck
12/02/18

Just 25 per cent of the self-employed are actively contributing to a private pension, according to the latest data from the Office for National Statistics.

Published, 9 February, the data revealed that the number of self-employed saving into a pension has dropped considerably since 2008, when the figure was 40 per cent. Commenting, NFU Mutual chartered financial planner Sean McCann said that pension contributions are “crashing among the self-employed”, who make up more than 15 per cent of the UK’s workforce.

“It’s a worrying trend. If just one in four in self-employment are actively contributing to their pensions, around 3.5 million are missing out. While auto-enrolment is making it easier than ever for employed people to save for their retirement, many in self-employment put off saving into a pension in favour of investing in their own business.

“The tax relief alone is a great incentive to make pension contributions, but many entrepreneurs don’t realise that they can use their pension fund to invest directly in commercial property or land, which their business can then occupy and still benefit from the tax advantages a pension gives. These latest statistics suggest many self-employed people may be missing a trick and could be facing having to extend their working lives by years, if not decades.”

In addition, the ONS published another set of data on the self-employed last week, which revealed the clear divide between employees and the self-employed when it comes to private pension wealth. Among the 35 to 54 age group, a large share of the self-employed do not have any private pension wealth (45.1 per cent) compared with employees (16.4 per cent).

This continues for ages 55 and above, with the highest share of the self-employed also having no private pension wealth. This paints an interesting picture between the two age groups, as the share of self-employed with no pension wealth in the ages 55 and above age category is 30.3 per cent, much lower than the share of self-employed in the 35 to 54 age group (45.1 per cent).

Facing growing pressure to tackle the issue of self-employed and pension saving, the government has revealed plans for a two-day workshop aimed at making retirement savings more accessible to self-employed workers.

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