Making the case for pensions for the self-employed

Pensions awareness week is the 31st October-4th November. It couldn’t have come at a worse time. With soaring bills and double-digit inflation, unions are warning that people are choosing to opt out of their pension schemes to help with the cost of living. And we know that given the urgency of the crisis, thinking long-term about pensions don’t always feel like a priority.  

Yet there’s one group for whom the pensions crisis has long pre-dated the cost-of-living crisis: the self-employed.  When we surveyed self-employed Community members we found that just 33% were contributing to a pensions scheme, whilst 20% were saving for retirement in another way. 44% weren’t saving for their future at all. Nationally, figures show that over the same period when pension savings rate for employees skyrocketed, the numbers of self-employed people saving for a pension actually fell to record lows.  

As difficult as it is, people, especially the self-employed should try to save for retirement where they can. Pensioner poverty has been rising since 2013-14. With the maximum new state pension just £9,627.80 a year, people will need to top this up to achieve an adequate standard of living in retirement. The Pension and Lifetime Saving Association has argued that 13.6 million people are at high risk of not saving enough to ensure sufficient retirement income. A “sufficient” retirement income is assessed based on whether it will maintain a person’s standard of living due to being an appropriate proportion of their working age earnings.  

Whilst there have been major policy successes that have raised the savings rate among employees, this hasn’t been the case for the self-employed. Auto-enrolment means employees aged over 22 and earning over £10,000 a year are automatically opted into a workplace pension. The policy has been fantastic at encouraging more people to save for retirement. Since 2012, when auto-enrolment rules came in, the proportion of people saving has increased dramatically: 87% of eligible workers were in a workplace pension scheme in 2019 compared to 55% in 2012.  

Yet, the self-employed aren’t eligible for auto-enrolment and nor are their retirement savings boosted by employer contributions. This makes it less attractive and less cost-effective to save for retirement. And when you’re already managing irregular income, setting aside money to pay an annual tax bill, and investing in the future of your business, it’s easy to see why pensions often aren’t top of self-employed peoples’ priority lists.  

At Community we believe it’s more critical than ever that self-employed people think about saving for the future. But the government needs to make changes too, to make it easier for self-employed people to build up a safety net for retirement. The Work and Pensions Committee is due to report on policy changes that could raise the savings rate among the self-employed. We gave evidence to the committee on the issues facing our self-employed members back in June and look forward to seeing the final report when it is published.  

Potential solutions include  offering a sidecar pension, where a savings pot sits alongside a pensions pot, using the tax return system to prompt people to think about their pensions choices, changing the model from opt-in to opt-out, in a variant of auto-enrolment, and offering generous government bonuses to boost people’s savings when they put money aside for the future. These options must be investigated thoroughly to ensure that they are fit for the self-employed, listening to the voices of the people who are most effected.   

At Community we’ve been campaigning for a safety net for the self-employed. It’s critical that we make it easy for everyone to save for the future. Our self-employed members are clear that they shouldn’t have to pay for flexibility with insecurity. Ensuring that retirement solutions are suitable for self-employed people is a critical part of the desperately needed safety net.  

In the meantime, if you’re self-employed, and you’re able to do so use this pensions awareness week to think about your plan for retirement.  If you’re a Community member, our guide to pensions for the self-employed can be found here.  

If you are a member of Community and need advice or support, please contact our Service Centre at or on 0800 389 6332.

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