Worry self-employed are 'being left behind' as third have no pension

New analysis from Boring Money revealed that 34 per cent of self-employed people have no pension at all. 

The research was unveiled at a webinar today (October 10) by Boring Money to launch its report entitled ‘Consolidation and Change’, which quizzed 4,000 adults in September on their savings for later life. 

Holly Mackay, founder and chief executive of Boring Money, said providers have an opportunity to tap into this neglected market as self-employed workers make up 13 per cent of the workforce.

She said: “The self-employed are undeniably being left behind as 34 per cent have no pension at all and the number of self-employed people is steadily growing. This is a key problem, not a new problem. We’ve seen some innovation from some providers but there’s still a huge opportunity.”

The analysis found that auto-enrolment has boosted pension uptake with 63 per cent of 18 to 24-year-olds and 64 per cent of 25 to 34-year-olds agreeing they have saved into a workplace pension due to auto-enrolment.  

However, the average 25 to 34-year-old has £26,000 in their pension compared to the average 55 to 64-year-old who has £127,000. 

Worryingly, 66 per cent of workplace pensions are valued at £20,000 or less, with almost three in 10 respondents holding under £5,000 in their workplace pensions.  

Mackay added that although more people are saving for their later life, the actual retirement pots are ‘scrappy’.

The appetite for help is there but the supply for realistic advice is not clearHolly Mackay, Boring Money

She said: “More people than ever have a pension but it’s a scrappy market. Over 65 per cent of workplace pensions are less than £20,000 and three in 10 have less than 5,000, so it’s a proliferation of smaller pots, which is clearly something that providers and the government are looking at.”

The data also showed that one third of non-retired adults have two or more pension pots. This rises to 44 per cent for 55 to 64-year-olds and increases to nearly seven in 10 for those earning more than £70,000.

Interestingly, three in 10 pension holders say they have consolidated in the past. 

Across all age brackets, 1.9mn UK adults with multiple pension pots said they plan to consolidate in the next 12 months. 

Mackay added that the 45 to 54-year-old bracket represents the biggest opportunity for consolidation as there are 3.2mn people who have multiple pension pots and 0.6mn of them plan to consolidate in the next year.

This comes as more firms are planning explicit consolidation campaigns with Aviva, AJ Bell, Moneybox, Penfold, PensionBee and Vanguard leading the way.

The data also found that nearly seven in 10 people have checked their annual pension statement in the last year, but fewer than two in 10 have actually done anything with that information over the last 12 months. 

Mackay said the massive drop in people having the confidence to take further action is down to an advice gap. 

She said: “Appetite for advice is high. When we talk to people, so non-retired people with pensions, 12 per cent say ‘I’m planning to take financial advice in the next 12 months.’ But that is an intent which is higher than the reality because of inertia. 

“We saw about 17 per cent of the 55 plus age group who have not yet retired say they planned to see an adviser in the next 12 months. That’s nearly one million people. That’s 40 clients per adviser, so clearly the supply is not there from a traditional financial adviser being able to service that need for that age group. So where do they go? This underpins the clear opportunity there. The appetite for help is there but the supply for realistic advice is not clear.” 

The data also found that awareness and understanding of pensions remains low with one in five pension holders admitting they are unaware that their money is invested and over half of pension holders saying they do not have a clear understanding of the fees they pay. 

Aamina Zafar is a freelance financial journalist