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Shy of retiring - addressing under-saving among self-employed people

28 January 2016

Cover image of Shy of Retiring reportWhile many self-employed people are happy in their work, we found that most hadn’t given a great deal of thought to when, if and how they might retire. We found that many assume they will continue to work (either full, or part-time) long past retirement age. While for some this is due to having a strong sense of ownership of their work, others, less positively,  have little provision for retirement and so feel they have no choice but to continue working.

While the number of people in self-employment has increased in recent years, at the same time the number of self-employed people saving into a pension has halved. This may be partially explained by the rise in part-time working and the drop in median income, which means that for many self-employed people, saving may simply be unviable. But this does not tell the whole story; self-employed people tend to start saving into a pension later than their employed counterparts, and only 24% of self-employed people with a household income of £1,000 or more a week are paying into a pension.

So why are so few self-employed people contributing to a pension? There is no evidence to support the idea they are relying on cash savings instead - cash savings accounts (including ISAs) are equally popular with self-employed people and employees, and among most age groups, the value of their savings are similar.

Pensions are not perceived to offer good value for money.  Shy of retiring - addressing under-saving among self-employed people [ 1.4 mb] reveals widespread misunderstanding of the tax breaks associated with pensions among self-employed people and employees alike - seven in ten (69%) do not understand the tax breaks provided by a pension. This, coupled with the lack of an employer contribution leaves many feeling that pensions are not a worthwhile investment.

This is compounded by both a lack of trust and lack of information. For instance, many are unaware of the flexibility offered by most pension providers - they believe that they would need to continue to pay into their pension, even if their income dropped or if they stopped working. Furthermore, while employees tend to get information about pensions from their employer, self-employed people have to  be pro-active and seek this out from other sources.

As such, self-employed people can feel isolated in terms of not receiving information and advice about their options, resulting in bewilderment and inertia. A self-employed person will not make the pro-active decision to contribute unless they both understand and trust pension products: a double barrier.

The recommendations that we make in Shy of retiring focus on the creation and expansion of initiatives aimed at encouraging self-employed people to save for their future, would help ensure some security for self-employed people at retirement.


  1. Government should create  an opt-in pensions system on self-assessment returns

  2. Government, pension providers and advice bodies should increase information and advice to self-employed people about pension options

  3. Government should provide more education on the value and rules of the State Retirement Pension for self-employed people

  4. Pensions providers should expand flexible pension products that enable self-employed people to save at their own pace

  5. Government and pension providers should work together to create and expand easy-to-use dashboards for self-employed people to use to see the value and trajectory of their pension

  6. Government should match pensions contributions up to a level of 1% of gross income.