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Self-employed workers in the UK are lagging behind their counterparts in many parts of the world when it comes to their own pension provision, new research has found.
A recent study shows that only 15% of Britain’s 4.6 million self-employed workers are very optimistic that they will have sufficient money to provide for their retirement. At the same time, three-quarters admit they do not save regularly for their old age.
The survey put the UK in second-last place out of the 15 countries it covered in North and South America, Europe, Asia, and Australasia. But while the research found a worrying lack of pension saving among UK self-employed workers, the flexibility offered by self-employment and freelancing could be beneficial in other ways.
Roughly half of those questioned in Britain said they felt optimistic that they would be able to decide when to retire, while most of the 53% who said they expected to work beyond 65 planned to do so for positive reasons – for example, because they enjoyed working or in order to keep their brains active.
The Department for Work and Pensions is currently reviewing the auto-enrolment pension system, which is, for the moment, aimed solely at employees.
However, there is growing pressure on ministers to extend auto-enrolment to self-employed workers in some way, and thereby encourage them to start putting money into a pension at an earlier age.
Recent changes to the state pension system mean that more self-employed workers should be entitled to a full state pension than has been the case in the past – often as a result of gaps in their National Insurance contribution (NIC) record.
However, there are concerns that the Government may be considering some form of amendment to the system of tax relief that currently applies to pensions.
The Chancellor’s recent U-turn on NIC increases for the self-employed means the Treasury faces a significant shortfall in expected revenues. And there is growing speculation that one of the tax-raising measures being considered for inclusion in the Autumn Budget is a 20% limit on pension tax relief.
This would make pension saving less attractive for higher-rate taxpayers, whether they were self-employed or employees.
If you’re looking to set up or review your pension – or would like a complete financial review – we can help.
Arrange a free consultation with our Investments and Pensions service today.
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