Just 16% of self-employed save through auto-enrolment

Just 16% of self-employed save through auto-enrolment

The number of self-employed workers saving into a pension through auto-enrolment has dropped from 19 per cent in 2012/13 to 16 per cent in 2016/17, according to new data published.

The Family Resources Survey data, published by the Department for Work and Pensions (DWP), showed that this downtrend for self-employed goes against the general numbers of auto-enrolment, with pension participation for employees increasing from 49 per cent in 2012/13 to 66 per cent in 2016/17.

Self-employed individuals, however, are not eligible for auto-enrolment, which was introduced in 2012.

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The government and regulator have been criticised for failing to come up with a joint approach to reforming the pension system for these group of workers.

Jon Greer, head of retirement policy at Old Mutual Wealth, said the data shows “pension savings has started dropping at an alarming rate” for the self-employed.

He said: “A savings policy for the self-employed needs to acknowledge that there are legitimate reasons why some self-employed people do not engage in pensions.

“One of the biggest challenges facing this group is the lack of certainty and security of income, which is particularly evident for those with lower and moderate incomes.

“It makes sense to keep an open mind about creative savings solutions for the self-employed and we hope the DWP will consider a pension ‘sidecar’ which would give early access to cash if required, which could be helpful to self-employed people with volatile or insecure income.”

The government-backed workplace pension scheme National Employment Savings Trust (Nest), will soon start a trial on this savings model, which builds on the success of auto-enrolment by additionally introducing an optimised level of liquid savings.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, agreed that survey results shows that there is a “need for some sort of auto-enrolment for the self-employed.”

The government said in its auto-enrolment review in December it was going to test a series of 'targeted interventions' on the 4.8 million or so self-employed to increase their pension saving, including working with banks and those who contract labour.

In the meantime, the DWP, HM Treasury and the Association of British Insurers (ABI) are meeting this week to explore ways in which technology could make it easier for the self-employed to save for retirement.