self-employed pensions

Is a self-employed pensions crisis looming?

Government urged to “act now” over self-employed pensions “time bomb”

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…


  • Andrew Harrison says:

    Good points in the article about Education and Accessability.
    I always found the numbers much bigger than expected.
    To get a good pension you need a very large pension pot. To get that pot you need to save significant amounts over a long period.
    The theory (for those that remember pension simplification) was that small businesses, the self employed and contractors could put large amounts in but irregularly – presumably approaching retirement when the capital isn’t being used. Succesive budgets have capped that (currently £40,000), what pension does that buy you? Well you can cut the numbers lots of ways but my rule of thumb was £100 a month. So starting a few years before retirement is too late. So start early and save lots.

    • Mick says:

      Or… dont bother feeding the rich and save and invest your self. I have watched too many people retire with nothing and thousands of their pension disappear. People seem to have such short memories of what happened with the pensions years ago and what is happening now. That 40k saved in an isa for instant, you can have instant access to it you can draw down on what you need to when you need to and also know that it’s safe it’s not going to be less than what you have paid in nor can any goverment shrill get their hands on it

  • Mick says:

    Wow what utter rubbish! Firstly pensions are a complete waste, they go to fund the bank accounts of the rich. They often get pilfered and you end up losing alot of it. Now they want to bring in brainwashing in to education regarding pensions?? Honestly I have sat through more pension seminars than I care to remember. I have constantly attacked how weak the premise of a pension and every time have left the rep not knowing how to answer as they have come undone. I have invested, I have allowed money to build within my own company that I can draw down on, i have bought and sold shares i have invested in property. I have very little debt, I owe on my mortgage which will be paid well before my retirement and I ahve savings… all far better than a pension that will drain your money in to the pockets of the rich!

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