Self-employed abandoning pensions

The number of self-employed men contributing to a pension has rapidly declined over the past two decades, with 22 per cent contributing to a personal pension in 2012/13, down from 62 per cent in 1996/97, according to Office for National Statistics (ONS) data.

The introduction of Isas and the 2008 recession were cited as reasons behind the decline.

There were 4.2m self-employed workers aged 16 and older in the UK in the first quarter of 2013, according to the most recent Labour Force Survey (LFS). Of these, 58 per cent were men working full-time, 12 per cent were part-time working men, 14 per cent were women working full-time and 16 per cent were part-time working women.

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The ONS report did not include data about pensions for self-employed women, stating the sample size was not indicative of the population as there are significantly fewer self-employed women than there are men.

Andrew Day, principle director at Manchester-based Depledge Strategic Wealth Management, said, “I think most self-employed workers tend to have a distrust of pensions without a disciplined employer plan in place. They are often more attracted to the property market, and think that there is little they can do over the tax involved with pensions.

“With the new pension freedoms, I imagine more self-employed workers might be looking into tax-relief options as the greater flexibility will help. Without access to good advice, people tend to focus on the negative.”

Individual and group personal pensions were first introduced in 1998, followed by stakeholder pensions in 2001. Nest followed and was made available at the end of 2011.

Although initially intended to be limited to employees, Nest was extended to include self-employed workers, single person directors and pension sharing on divorce.

Around 13.4m Britons aged 16 to 64 – out of a total 40.5m – were active participants in private pensions in 2012/13, according to data from the LFS and Family Resource Survey (FRS).

The gender gap between the proportion of men and women aged 16 to 64 contributing to private pensions decreased in 2012/13 to 3 per cent from 20 per cent in 1996/97. There were 6.8m men and 6.3m women aged 16 to 64 who contributed to a private pension in 2012/13.