Pension gap for self-employed

MORE than two million selfemployed workers have no pension savings as the surge in flexible work and the gig economy means a significant chunk of the labour force is not covered by workplace pension schemes. More than one million people expect to have no private pension by the time they retire, leaving

them entirely reliant on the state pension alone.

Self-employment has surged in recent years, rising from 3.9m workers a decade ago to 4.8m now.

Two-fifths of those workers have no pension pot, according to a study by Prudential. Just over one third said it is because they cannot afford to save.

As a result, 31pc of self-employed Britons expect to have no savings for their retirement, leaving them with only the state pension. The basic income stands at £8,545 per year.

Another 28pc said they will be reliant on their business for old-age income. This contrasts sharply with employees whose savings levels have soared due to automatic enrolment into pension schemes.

The system means workers and their employer start paying into a pension pot unless the employee actively chooses to opt out. As a result savings levels have jumped from 47pc of employees in 2012 to 73pc now.

“Saving for retirement is tougher when you are self-employed as there is no-one to organise a pension for you and no employer making contributions on your behalf,” said Kirsty Anderson at Prudential.

“On top of that, self-employed workers often don’t have a regular income so many will focus on setting aside money as a safety net if they cannot work.

“Saving for a pension is still important, as no-one wants to work forever and no matter what your employment status, having money to fund your retirement is essential as the state pension is unlikely to be enough to fund a comfortable retirement.”

Self-employment industry group IPSE said the Government should introduce a new savings system to help.

“The sheer volume of self-employed people failing to save for later life is an extreme concern, but now there is a real opportunity for both government and the pensions industry to avert this crisis,” said its director of policy Simon Mcvicker.

“We support rolling out a sidecar pension scheme, allowing the selfemployed to save for later life and also into a separate ‘rainy day’ fund for emergencies.”