Pensions  

Consider the self-employed

Alison Steed

Alison Steed

There were shocking revelations last month from the Department for Work and Pensions about how self-employed people in the UK fail to put money into pensions for their retirement.

Well, I say shocking, but I am being more than a little tongue-in-cheek with that statement because it really comes as little surprise to me whatsoever and I am sure it is of little shock to you as experts in this field.

But I do think what the DWP is discussing in its auto-enrolment evaluation report 2019 is important to consider for a number of reasons.

There are currently 5m people – 15 per cent of the UK’s working population of 32m – who are self-employed, up from 3.3m in 2001, made up of all sorts of people including those who have actually retired but continue to work freelance as consultants, and others working in the so-called gig economy.

Yet the number of self-employed people paying into a pension has decreased from 27 per cent in 2008-9 to just 15 per cent in 2017-18.

While these figures are woefully low and clearly show there is a need to encourage the self-employed to plan ahead for their retirement, it is still no surprise to me.

There are a number of suggestions put forward on page 92 in the report as to why these figures have fallen, including the movement of people in and out of self-employment, older workers who may have already retired and are receiving a pension still working on contracts to extend their working life, and more women becoming self-employed.

There is a nod to the effect of the economic downturn and its aftermath, and in my opinion this is likely to have delivered more than a glancing blow.

The self-employed are in a far more precarious position than their employed counterparts.

Self-employed challenges

For example, there is no sick pay, no employer contributing to a pension for you and no redundancy pay if you are out of work.

There are major pluses however, the freedom to work as and when you want, for who you want and to take on or turn down projects at will.

However, and perhaps more importantly given the figures on how the number of self-employed pension contributors have fallen by almost half in just under a decade, there are no pay rises year-on-year as there typically are for employees.

In fact, I remember very well how one of the biggest companies I was writing for back in 2008 at the time of the financial crisis told me it could no longer afford to pay freelancers the same rate as it had been and reduced its rates by one-third.

I could like it or lump it, but I needed the work, so I carried on.

Many things have changed since then, with revenues for businesses recovering for the most part.