Self-employed pension saving levels fall to new low

Self-employed pension saving levels hit record lows in 2019/20, figures from HMRC have shown, with self-employed workers contributing £830m to pensions during the year, compared to £1.15bn in 2018/19.

The figures revealed that whilst total individual contributions had increased year-on-year, rising from £9.7bn in 2018/19 to £10.5bn in 2019/20, self-employed workers had bucked this trend, recording a continued decline in total contributions since a peak of £1.97bn in 2015/16.

Self-employed workers also missed out on the £20.8bn worth of employer contributions made in 2019/20, up from £18.2bn in 2018/19.

AJ Bell head of retirement policy, Tom Selby, said that given the number of self-employed workers had been spiking over the past two decades, the fact the amount being saved in pensions had fallen “dramatically” among this subset is “both counter-intuitive and extremely worrying”.

The firm noted that the figures do not capture the impact of the pandemic and lockdowns, suggesting that this will "almost certainly" have pushed self-employed saving levels even lower.

Selby commented: “While automatic enrolment has been successful in boosting pension saving among employed workers, it does precisely nothing for the self-employed.

“The government has previously promised to extend the principles of auto-enrolment to the self-employed, but so far we have seen little by way of progress.

“Without a nudge into a pension scheme and a matched contribution, it is hard to see how policymakers can dramatically move the dial on self-employed retirement saving.

“People are always looking for the next big pensions crisis – this could be it. If the government doesn’t step up and do something to boost savings levels among the self-employed, there risks being millions of people facing retirement disaster in the not-too-distant future.

“At the very least a communications drive to emphasise the importance of retirement saving among the self-employed – and the dangers of doing nothing - is urgently needed.”

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