Self-employed workers' confidence in pension preparedness falls amid Covid-19

Belief in the importance of retirement savings amongst the self-employed remains unaffected by the pandemic, but confidence in retirement preparedness has been negatively impacted, research from Nest Insight has revealed.

It found that whilst 75 per cent believed putting aside money for retirement is important, up slightly from the 74 per cent recorded in 2019, 60 per cent of self-employed people have seen their income negatively hit by the pandemic.

Furthermore, it revealed that 37 per cent of self-employed people, and 22 per cent of employed people, have seen a fall in their confidence that they will be able to financially provide for retirement amid the pandemic.

Despite these concerns, the survey found that the majority (74 per cent) of the self-employed feel able to save now, or in the next year, with 51 per cent stating that they amount they are currently saving for retirement has not changed.

However, 20 per cent of self-employed people have reduced their retirement savings, with just 9 per cent having started or increasing the amount they are saving for their pension.

A similar proportion (19 per cent) of the self-employed have also reduced their emergency savings, whilst 15 per cent have started or increased emergency savings amid the pandemic.

There was little change around attitudes to guidance, with 53 per cent of respondents stating that they are open to guidance about how to best save for later life, consistent with the 55 per cent recorded in 2019.

The research is the latest part of Nest Insight’s ongoing programme, supported by the Department for Work and Pensions (DWP), which aims to test a range of approaches to encourage and enable retirement savings in a way that is aligned with self-employed people’s needs.

The latest findings will be coupled with previous insights from trials conducted in 2019, and act as a “valuable foundation” for a series of technology trials planned for 2021, testing tools and automated approaches designed to help self-employed people to save.

Nest Insight emphasised that the findings suggest that planned technology trials remained appropriate for many self-employed people who are open to support, want to save, and are still able to now or in the future.

In particular, it highlighted that 57 per cent of respondents liked the idea of automatically diverting some of their income into retirement savings, with just 9 per cent of this subset opposing paying into a pension.

Considering this, Nest Insight has confirmed that it will now be working to develop technology-based trials of the interventions designed to make it easier for self-employed people to save.

This will include exploring the effectiveness of auto-saving mechanisms, and looking at whether options that allow people to sign up now and save later could be an option.

It will also attempt to understand whether some levels of liquidity makes retirement saving more attractive and practical for self-employed people, for example exploring ‘sidecar-like’ solutions that split saving between an accessible account and a pension.

Nest director of research and innovation, Jo Phillips, added: “Because our research programme is based on the principle of designing solutions that specifically fit the needs and context of self-employed people, it was vital to conduct this research to see if and how that’s changed as a result of the Covid-19 pandemic.

“Many self-employed people have seen their income negatively affected this year, but a large proportion continue to want to save, and feel able to do so, either now or in the future.

“Based on what we have learned from this research, we believe flexibility to variable and uncertain income, and predictability and control, are likely to be important features for solutions designed to support them to do so."

She continued: “We plan to continue with our trials in 2021, collaborating with other organisations to test tools and automated approaches that better meet self-employed people’s savings needs and preferences, to encourage and enable those who feel able to save.

“Whilst we recognise that not everyone is in a position to save now, by continuing with our research we hope that at times when the more vulnerable are able to save there will be mechanisms in place to support them.”

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