On Pensions Awareness Day (15th September), IPSE, The Association of Independent Professionals and the Self-Employed, warned that without urgent change, 3.3million solo workers could be left without a pension in the next 10 years.
This theory is based on extensive research carried out by the association, which takes into account the rapid growth of independent working in the UK and the number of self-employed individuals who have never saved into a pension.
According to IPSE, 55% of self-employed people do not have a pension at present. At the current rate of growth in UK self-employment, which is predicted to account for 6 million workers by 2028, this will leave as many as 3.3million independent workers without pensions.
Commenting on this forecast, Senior Policy Advisor at IPSE, Jonathan Lima-Matthews, was critical of the lack of suitable pension products on the market for self-employed workers.
“It is deeply worrying that so many hardworking people could be left facing bleak later years because there simply aren’t products that work for them,” he said.
He also went on to predict that “the longer this is left, the worse it will get”, before encouraging the Government to “urgently get behind innovative pensions solutions and push the industry to do much more.”
The trade association also stated in a pensions report last year that Government “intervention would go a long way”, outlining in ‘How to solve the self-employed pensions crisis’ – six ways the issue could be solved:
Roll-out the sidecar pension: This product channels money into a pension pot and a separate ‘rainy day fund’, which can be drawn in an emergency. IPSE believes this would suit lower self-employed earners who need flexibility when saving.
Tailored savings guidance needed: Only 51% of the self-employed trust Government websites for advice, but even so, many of these people believe this information is designed for employees, not independent workers. As a result, IPSE wants the Single Financial Guidance Body to offer advice specifically for the self-employed.
End pension jargon: IPSE’s focus groups told them independent workers are only looking for the “key terms” of pension policy and were often overwhelmed by what was described as “unnecessary terms and conditions.” In its report, IPSE made the point that “language should be used that is accessible to all.”
Introduction of the ‘mid-life MOT’: With the average age of a self-employed worker sitting at 46, according to IPSE, a ‘mid-life MOT’ would allow an advisor to work with these individuals to ensure they are saving enough for retirement before it’s too late.
Better education around pensions: IPSE believes younger people studying courses that tend to lead to self-employment need to know about the importance of pensions. In doing so, and with support from pensions providers, students would be better educated about pensions before venturing into self-employment.
Auto enrolment not right for self-employed: The body does not think auto enrolment – when an employer automatically enrols a worker into a pension scheme and contributes towards it – would work for the self-employed. IPSE said without an “obvious way to capitalise on the successful components of AE” when focusing on the self-employed, the Government would be better off introducing products such as the sidecar pension.
In conclusion, IPSE made it clear to the Government that freelancers, as “the essential drivers of innovation for the UK economy,” need greater support – something the trade association also alluded to in its report, which called on Westminster to “act now to defuse this ticking time bomb.”
Financially speaking, are you prepared for retirement? Join the conversation below…