New research shows more self-employed people are saving for retirement

New research shows more self-employed people are saving for retirement

More than a third of self-employed people are saving into a pension, according to new research from IPSE, The Self-Employed Association.

There have long been concerns that those who are self-employed are falling behind when it comes to pension savings.

In July this year, the UK government relaunched its Pension Commission as part of attempts to address fears future retirees will be worse off than today’s. It came as figures were released showing more than three million self-employed people aren’t contributing to any sort of retirement fund.

And in August, think tank The Social Market Foundation urged the government to address what it called the ‘self-employed pension crisis’.

Researcher John Asthana Gibson warned that if the current trend continued “large numbers of Britain’s entrepreneurs will struggle to live to the standards they rightly expect in retirement”.

However, the research from IPSE indicated more self-employed people are saving into a pension.

The survey, which featured people whose main source of income is self-employment and who earn more than £10,000, revealed 38% of respondents were currently saving into a pension.

This is a significant improvement compared to national estimates, including Office for National Statistics figures for April 2018 to March 2020 which showed only 20% of those who are self-employed were saving into a pension.

• Self-Invested Personal Pensions are the most popular option, with 30% of those who were saving using them
• Stocks and Shares ISAs (22%) and other savings accounts (21%) were also popular, but only seven per cent of those saving said they were using a Lifetime ISA
• A third of those currently saving for retirement are saving less than five per cent of their annual income

That final figure will remain of concern as it indicates that many of those who are saving are only putting a small amount of money aside for their retirement.

The survey also revealed that 17% of those questioned didn’t know how much they are saving.

Six per cent said they were saving more than 40% of their income.

These figures show that although there is evidence that more self-employed people are investing in pensions, work still needs to be done to highlight the need for retirement planning among that cohort.

• Planning for retirement doesn’t have to be overwhelming. Our guide to navigating retirement planning addresses the most common questions around savings and pensions.