Only one-third of the self-employed UK workforce are paying into a pension despite most being concerned about their ability to cope financially after retirement, says a new study.
The research, published by the Association of Independent Professionals and Self-Employed (IPSE), polled over 1,000 self-employed people.
It says that millennials (those reaching young adulthood in the early 21st century), women and those new to self-employment in particular “are facing a bleak future”.
“With just 31% of the self-employed saving into a pension, we must take urgent action to avert a looming crisis. Self-employment is a progressive way of working, but unfortunately current pension provisions simply do not cater to their needs,” said Jonathan Lima-Matthews, IPSE’s senior policy adviser.
With ever-increasing numbers of people opting for self-employment as the so-called gig economy continues to grow, IPSE says many will be reliant solely on the state pension to survive in later life.
Lima-Matthews said: “The recent growth in self-employment has been a revelation, but now we need a revolution to provide them long-term financial security and alleviate this ticking timebomb.
“There is a real opportunity for both government and the pensions industry to avert this crisis by developing feasible and forward-thinking solutions to give long-term peace of mind to the burgeoning self-employed workforce.”
The report claimed that auto enrolment was not an effective incentive for people to continue paying into a pension when moving to self-employment, with only 36% saying they would remain enrolled compared to 25% who would opt out and 38% who were unsure of their plans.
“While auto enrolment has been a successful policy for boosting the number of employees paying into a pension, our research found it’s simply not a viable savings solution for the self-employed. There is no employer to enrol them, and it also reduces their ability to be flexible and in control of their money – two of the fundamental attractions of self-employment,” said Lima-Matthews.