Research finds 1.7m self-employed aren’t paying into a pension

‘Worryingly high’ number of self-employed not preparing for retirement, with research also uncovering uncertainty over pension fees

A “worryingly high” number of self-employed are “risking an uncertain retirement”, with an estimated 1.7m flexible workers not paying into a personal pension.

This is according to research conducted by CMC Invest, which highlights the challenges facing the self-employed when it comes to preparing for retirement. Based on a survey with over 5000 respondents, 41% of those identifying as self-employed reported that they had no personal pension.

While permanent employees are auto-enrolled into pension schemes, the self-employed are responsible for making their own retirement arrangements. However, these findings reveal that many are missing out on the security that a pension could provide.

Research uncovers wider issues

This is primarily the result of low awareness of the available pension schemes for the self-employed, which are typically Self-Invested Personal Pensions (SIPP). 

However, despite being widely available, CMC Invest’s survey found that 44% of self-employed people are unaware of SIPP schemes. In addition, more than half (58%) of those surveyed were unaware of the administrative fees charged by pension providers. 

The findings reveal that there is much uncertainty around pensions and financial planning for the future – not just among the self-employed, though this group is at greater risk.

Of equal concern is the number of ‘lost’ pension pots, estimated to be worth £19.4bn in total by the Association of British Insurers. 

With employers required by law to auto-enrol permanent employees into a personal pension scheme – and with a wide selection of providers – the research shows that even permanent workers are at risk of losing track of their savings. 

This also applies to self-employed workers who have previously been employed and may have ‘lost’ pension pots which they will need in the future. 

Figures are ‘concerning, but not surprising’

David Dyke, head of CMC Invest, said the research highlighted the importance of making appropriate financial provision for the future – especially if self-employed. 

“The statistics, while not surprising, are concerning. A pension is there to provide you with an income in the future”, he said.

“Without a pension, as people approach the age they’d like to ease up on work, they’re likely to be left short”, Dyke added. This is a risk in particular for the self-employed, who are responsible for ensuring their own future financial security. 

Eligibility for the state pension – which offers a modest weekly payment on retirement – requires at least 10 qualifying years on an individual’s National Insurance record. 

As such, personal pensions offer additional financial security, and many providers offer SIPP schemes specific to self-employed workers, including CMC Invest.

These operate in the same way as personal pensions, with flexibility over the amounts saved and control over the investment level, Dyke explained.

“With a SIPP, it’s easy to start, stop and change pension contributions at any time, making it fit with the often irregular income pattern of self-employed people”, he said.

Typically, SIPP schemes have a “simple fee structure”, and existing pensions held with other pension providers can be transferred into the account – allowing the self-employed to consolidate pensions and save for retirement.