The latest government figures show that the number of self-employed people in the UK is at a record high with 4.6 million – 15% – of the UK workforce working for themselves. The number of self-employed people has increased by 732,000 since the first quarter of 20082.
However, Prudential’s research found that self-employed people – who focus primarily on developing their businesses – often have little spare cash left for investing in retirement plans. Just 17% of self-employed people regularly contribute to a pension while another six per cent make contributions when they can.
The main barrier cited by those self-employed workers not contributing into a pension is affordability. More than half (57%) claim that they have other financial priorities or simply cannot afford it, with a further 16% having either turned their backs on saving into pensions, or are planning to rely on their businesses to fund their retirements. Six per cent say they will never stop working. And nearly one in 10 (nine per cent) don’t currently save into pensions, instead choosing to reinvest any spare money back into their businesses.
Worryingly, the research shows very little appetite for saving in the future among the self-employed, with 52% admitting to having no plans to start saving into a private pension, or resume pension payments. Only 27% will start saving, or restart saving, with 20% remaining undecided.
The research reveals a generation gap when it comes to self-employed peoples’ attitudes to pensions – potentially reflecting a surge in older workers who have become self-employed after leaving previous jobs.
More than two-thirds (69%) of self-employed workers aged between 18 and 34 have no pension savings, compared with a third (32%) of those over the age of 55. Around 46% of self-employed workers over the age of 55 have pension savings which they no longer contribute to.
Stan Russell, retirement income expert at Prudential, said:
“The financial pressures of starting and growing a business often means that spare cash is hard to come by.
“Focusing on day-to-day finances is second-nature for those who are self-employed. However, not considering or planning for the longer-term is a risky approach, especially if those who own their own businesses don’t want to end up having to work past their ideal retirement age.
“Pension reforms that are due to come into effect in April 2015 will increase the flexibility of pension saving, but the onus is still very much on individuals to save as much as possible from as early as possible. Only then will people be able to maintain the standard of living they deserve, after they have stopped working.”
The research shows that the overwhelming majority (86%) of self-employed people who do make regular contributions have personal pensions, while 16% have company pensions, and 17% have SIPPs.
