The self-employed market is experiencing a boom.
The latest figures from the Office of National Statistics show that the number of self-employed people increased to 4.8m in the period between February and April 2017, up by 103,000 from the same period in 2016.
This means that self-employed individuals in the UK make up 15 per cent of all people in work.
The potential for success in having your own business is a big draw for many people, despite the risks attached.
But for many going down the self-employed route there is danger ahead as they approach retirement age. As the self-employed population expands it raises the question of how many of these individuals will be able to save for their retirement.
Unlike those in full-time employment who are signed up by default to automatic enrolment scheme, self-employed individuals have to actively choose to set up their own pension pot.
Voluntary
And because it is voluntary, the number of self-employed who have signed up to their own pension programme is much, much lower than those in full-time employment.
The self-employed range from part-time workers and sole traders through to entrepreneurs that are on the path to creating a small business which will become an employer in the future.
Joinery, plumbing, taxi driving and hairdressing are among the largest sectors with self-employed individuals. But the statistics on how financially prepared they are for their future in retirement make for a worrying read.
According to a report by Aviva and Royal London on ‘Solving the under-saving problem among the self-employed’, one in five self-employed people do not have a financial plan for retirement other than relying on the state pension.
And latest figures from the Department of Works and Pensions (DWP) suggest that barely one in seven self-employed put any money into a pension last year, adding that the proportion has been falling for many years.
Key points
Many going down the self-employed route do not save enough for retirement.
The Lifetime Isa only works for the under 40s.
A report from Aviva and Royal London said that auto-enrolling self-employed people into a pension through the self-assessment tax process would help.
Women and pensions
Women are also at a greater disadvantage.
According to the study, self-employed individuals are much less likely to be female – 30 per cent compared to 49 per cent of male counterparts.
In terms of participation, the report found that only 8.9 per cent of self-employed women contribute to a pension, compared to 15.2 per cent of men.
By age group, individuals aged between 25 to 34 and 65 and over, have a lower participation than other age groups.
As a result many face a bleak retirement unless action is taken.
Nathan Long, senior pension analyst for Hargreaves Lansdown, said: “The number of self-employed is growing, but the same is not true of the number saving into pensions, which is why change is so necessary.
