The Pensions Commission’s interim report has revealed worsening pension participation among the self-employed, described as a “ticking timebomb” by Barnett Waddingham partner - corporate defined contribution (DC) pensions, Martin Willis.

The report analysis stated that “self-employed pension participation has fallen and is stagnating, and is low compared to eligible employees”.

The report confirmed the proportion of self-employed people saving into a pension in a typical month fell from around 50 per cent in the late 1990s to less than 20 per cent, dropping to 4 per cent (around 100,000 individuals) among those who relied solely on self-employed income.

The self-employed population also saw a decrease in real terms income over time, and this group generally had lower annual earnings, and a larger distribution of earnings, than employees.

Willis said that while the pension savings habits of the self-employed have long been a concern, “the latest findings show the situation has worsened dramatically, and this is now a ticking time bomb for the UK self-employed workforce”.

“Not only has the composition of the self-employed changed since the first Pensions Commission, but so too have their levels of pension participation,” he added.

Willis explained the rise of the gig economy has changed the nature of self-employment, with more workers on lower and less predictable incomes, increasing concerns about retirement savings and the gender pensions gap.

“This makes pension saving even more important and valuable," he said. "Yet for many, pensions for the self-employed remain a well-kept secret.”

Willis explained the challenge was partly about “education and accessibility”, explaining the importance of getting more people to understand the benefits of saving into a pension, and overcoming any perceived complexities.

“Expanding access to simpler, workplace-style solutions and improving awareness through digital tools and industry collaboration could help drive engagement,” he said.

He added that younger self-employed people were particularly at risk of undersaving and needed support to understand the scale of the challenge and the options available.

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