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Self-employed heading for pension disaster


Updated on 19 February 2018 | 3 Comments

Almost a third of self-employed people aged over 55 have no pension savings at all and are heading for a retirement catastrophe, official figures show.

The Office for National Statistics (ONS) has revealed new data on the soaring number of people who are self-employed.

There are now 4.8 million people in the UK who are self-employed. That is a 45% increase from 2001 when there were 3.3 million people classed as self-employed.

The number of self-employed workers has consistently grown every year for the past 15 years with the ONS previously stating that the performance of people who work for themselves was one of the “defining characteristics” of the country’s economic recovery following the financial crisis in 2008.

Last year, it was revealed that 15% of England and Wales are self-employed, with London and the South having the highest proportion at 17%.

The Isles of Scilly has the highest number of self-employed workers, with a third of the island’s workforce self-employed.

But, while high numbers of self-employed workers may have helped pull us out of the economic doldrums these workers are careering towards catastrophe.

That’s because a startling 45% of 35 to 45-year olds and 30% of over 55s who are self-employed have no pension savings whatsoever.

These figures are backed up by data from HMRC which shows that fewer than one in 10 self-employed workers are currently paying into a pension.

“These statistics point to an impending pension crisis for the self-employed, with millions of them heading towards retirement age with no pension savings to draw on,” says Tom McPhail, head of policy at Hargreaves Lansdown.

“What’s more there is no immediate prospect of the situation improving, with less than one in ten currently contributing to a pension.”

Find out how much you need to save for retirement

Pensioners turning to self-employment

In a sign that many people may be hitting retirement and finding their pension income isn’t enough there has been a “sharp rise” in the number of older people becoming self-employed, according to the ONS.

The number of self-employed people aged over 65 has risen by almost 200% over the past 15 years from 159,000 to 469,000.

Older self-employed workers have substantially more property compared to other workers, but this won’t necessarily improve their finances when they retire.

“The good news for some is they have built up good levels of property wealth, but this is by no means universal and could present challenges in unlocking the equity,” says McPhail.

Thinking of going self-employed? The lessons I've learned about tax, budgeting and more

Self-employed heading for pension disaster (Image:Shutterstock)

Government needs to tackle crisis

With the self-employed making up an increasingly large proportion of the population and pension saving incredibly low in this group the government needs to act to make pension contributions more appealing.

While the rest of the population benefits from auto-enrolment which has seen the number of people saving for retirement dramatically increase, the self-employed are still struggling to prioritise pension contributions.

“Pensions offer generous tax breaks, but it is clear these do not appeal to the vast majority of the self-employed,” says McPhail.

“The government has a real challenge on its hands to deliver on its manifesto promise to bring the benefits of auto-enrolment pensions to the self-employed.”

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  • 05 April 2019

    I have been self employed for 46 years. never claimed any benefits or sick pay,the same goes for our 3 children who are fully employed as are our 2 oldest g'children. payed all my NI stamp including 8% of earnings on top of the 20% income tax .all my income audited and despite a stroke, open heart surgery,broken feet,broken ribs and many other calamities I am still working as a roofer at 75. So I am punished with the lowest pension. Broken Britain.

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  • 20 February 2018

    Not forgetting MP's only have to put in 15 years for a full pension besides the bunces they receive when they move onto their new gold plated careers after being an MP.

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  • 19 February 2018

    It is certainly correct that there is a problem looming but beware of Government backed or Government proposed schemes. Here is a time line warning. 1997 Government asked a prominent back bencher to look into pensions. He came back with a report that spelled out an impending massive hole in pension provision. What did they do? Did they welcome the candid nature of the report and set about doing something about it? No the buried the report, Booted the MP back onto the back benches. Here is what they did over the next few years. 1 Massively increased MPs pensions provisions 2 Mounted a huge TAX raid on Private Pensions - more or less destroying the industry in the proess. 3 Then suddenly discovered that there was an enormous hole looming in the payment of pension to us peons. Of course we were then told it was all down to us, how dare we live longer, so we would have to work longer and pay more ino the scheme to fill the hole in the coffers. The coffers, by the way, that was liable for their hugely inflated, gold plated pensions. So compulsory work place pensions were introduced. TAX by another name??? The Welfare State and National Insurance. It will look after you from the cradle to the grave. We just don't fill our graves early enough. The world's largest pyramid scheme. If any of us tried it we would be in jail. Ooooooo It's an Equitable Life Hendry!

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