Only 2m self-employed workers would meet the eligibility thresholds for joining a workplace pension with the current auto-enrolment framework, research from the Pensions Policy Institute (PPI) showed.
This represents less than half of the total UK self-employed population, which is now at 4.8m.
Under the current rules only workers which earn more than £10,000 in a single job will be auto-enrolled into a pension.
The government is currently reviewing auto-enrolment, with a report expected to be publish before the end of the year.
Of the 2m which would be captured, 77 per cent are male and Generation X is the biggest generation represented.
Which means women would be disproportionately impacted, excluding 73 percent of the female self-employed workforce.
Nathan Long, senior pension analyst at Hargreaves Lansdown, said these results showed the earnings threshold should be lowered to include more people.
He said: “Employed women disproportionately miss out on pension saving too, so this is not just a quirk of the self-employed.
“It is also worth bearing in mind that over 400,000 of those working self-employed are over 65, meaning if they were employed they would miss out too.”
But the research highlights that from the total universe of the self-employed there is insufficient information to determine potential eligibility for between 1 and 1.5m.
The report also showed the self-employed are less likely to save into a pension, with just 12 percent actively paying in today.
And only 28 percent of the self-employed believe pensions are the safest way to save.
Jamie Jenkins, head of pensions strategy at Standard Life and chairman of the Department of Work and Pensions (DWP) external advisory group supporting the government’s auto-enrolment review, told FTAdviser the self-employed are the most significant and obvious group of people which should be enrolled into pensions.
He said: “State pension alone will mean quite a drop in income for those people, so they really need to be saving.
“Generally speaking, they are not that different from employed people, so why shouldn’t we get them saving? The problem is how.”
Mr Jenkins said the advisory group was looking at all aspects of the current set up, including the age at which people are auto-enrolled, the trigger, the band of earnings and the rates going forward.
No decisions have been made on any changes to be implemented, he added.
Jon Greer, head of retirement policy at Old Mutual Wealth – sponsor of the PPI report – said the government needs to ensure it tackles the growing savings gap, as self-employed are “set to outstrip the number of public sector workers by 2020”.
He said: “But a savings policy for the self-employed also needs to acknowledge that there are legitimate reasons why some self-employed people do not engage in pensions.
“I would urge the government to steer clear of a ‘one size fits all’ approach to pension saving for the self-employed.”
The provider made some recommendations to tackle this problem, including using the annual self-assessment process to default the self-employed into pension saving.
This could be done by nominating an existing pension arrangement; one the individual has chosen to use, or the saver would be pointed towards a guided shortlist of suitable schemes.
This solution has been proposed before in a report from Aviva and Royal London, presented last July.
Old Mutual’s second recommendation was the creation of a "sidecar" model for self-employed pensions.
Contributions would be paid into a combined account structure initially distributed between a liquid account and another which is the pension account.
Once funds reach a certain level in the liquid account, then all contributions would be paid into the pension account.
The provider’s third solution is a coordinated package of changes aimed at increasing retirement savings across self-employed.
For example, create a collective income protection scheme which can generate the economies of scale needed to reduce costs.
maria.espadinha@ft.com
