The Parliamentary Under Secretary of State for Pensions and Financial Inclusion, Guy Opperman, recently pointed out that only around 14% of those who are self-employed were saving into a pension in the 2016/17 financial year. Furthermore, a study by Prudential suggests that of the 4.8million people working for themselves, nearly a third plan to rely solely on the state pension with a fifth thinking saving for a pension does not apply to them.
Stuart Price, Partner and Actuary at Quantum Advisory, explains why these figures are so worrying and what action is being taken to change the status quo. Stuart said: “There’s no denying, if things carry on as they are, and the majority of self-employed people continue to ignore their pension responsibilities, there is going to be a pension crisis. We can’t blame the individuals however; the government has let this happen. We’ve seen how successful auto-enrolment has been since its introduction in 2012, and for some reason, the self-employed have been excluded from this efficacious scheme.
“Thankfully, things are changing. Under plans unveiled in December 2018, the Department for Work and Pensions (DWP) are developing new ways to include all self-employed workers in saving for their ultimate retirement. The DWP has disclosed that a trial will encourage individuals who become self-employed or freelance to continue making contributions to a pension or long-term savings product and will ensure that the better use of financial technology will help them overcome any barriers to saving.
“This is long overdue and we will wait to see the details of the plans.”
Stuart Price, Partner and Actuary