Guidance body The Pensions Advisory Service (Tpas) has today (22 January) launched a campaign designed to raise awareness about the low levels of pension saving among the self-employed.
Whilst auto-enrolment has been successful in increasing the number of employees who hold workplace pensions, less than a third of self-employed say they pay into a pension, the guidance body said.
Business owners often instead plan to use their business to fund their retirement, which, according to Tpas, comes with risks.
The guidance body has created a dedicated information and guidance document, Pension saving for the self-employed and small business owners, which details the benefits of saving into a pension, how to choose a pension, how to maximise pension savings, and options upon reaching retirement.
Introduced in 2012, auto-enrolment has now reached 9m people, but so far hasn’t been extended to the gig economy and self-employed.
According to the auto-enrolment review report published in December, the government will only legislate on including the self-employed in workplace pensions before the end of parliament, or 2022.
Michelle Cracknell, chief executive of Tpas, argued that “since the crash of 2008, the shape of employment has changed”.
She said: “In 1975, only 8.7 per cent of the workforce worked for themselves. By 2008, that had risen to about 12 per cent and is now growing close to 16 per cent of the workforce. The number of self-employed may soon overtake the public sector.”
“Understandably, self-employed customers have pressures on their time running their own business so are more likely to concentrate on the more immediate financial requirements rather than pensions or long term financial security.
“Yet the need for everyone to take responsibility for their retirement income is the same.”
Depending on individual circumstance, saving into a pension can also make business sense, with rules allowing business owners to minimise tax charges and provide commercial investment, Tpas said.
Chris Curry, director of the Pension Policy Institute (PPI), said that “many of the self-employed are at risk of under-saving for retirement, but they do not benefit from automatic enrolment”.
A report published by the PPI in November showed that gig economy workers could see their pension pot increase by up to £75,000 if auto-enrolment was extended to them.
Mr Curry added: “And fewer than one in five of the self-employed believe that their business will provide them with any income in retirement.”
According to Simon McVicker, director of policy at the Association of Independent Professionals and the Self Employed (Ipse), “with only 17 per cent of self-employed people paying into a pension, there is a real need to raise awareness so more take that crucial step to save for later life”.
He said: “It is great to see TPAS offering practical tips to help them on their way to a more secure future.”