Self-employed Put Retirement At Risk By Not Saving For A Pension

Self-employed Brits who have started to work for themselves after leaving ex-army jobs are not thinking about the future, as millions are failing to contribute to their pension pot.

According to the HMRC and Office for National Statistics’ latest figures, just nine per cent of self-employed people paid into a personal pension in 2013/14. Out of the 4.6 million people who were registered as self-employed during this time, only 420,000 saved into pension schemes.

Vince Smith-Hughes, a retirement income expert at Prudential, said they are putting themselves at risk of an “inflexible future”.

“Every year that goes by without making any pension contributions is a year less for any savings to grow and help provide for retirement,” he stated.

His comments come as the ONS revealed the number of self-employed workers has risen by almost 40 per cent since 2001/02 when 3.3 million worked for themselves. However, a third of these made pension contributions at the time, showing a steep decline in the proportion of workers who are investing into their retirements.

The reasons behind this drop include having other financial priorities (57 per cent), reinvesting back into the business (nine per cent), and plans to not stop working (six per cent).

Conversely, military veterans who are seeking employment will be able to benefit from company pension schemes, with the government making it obligatory for all businesses to provide and contribute to their employees’ retirement pots by 2017.

The Pensions Act 2008 dictates that employers will have to contribute one per cent per cent of their staff’s wages into their pension – along with one per cent of the employee’s contribution – until 2018, at which point this increases to two per cent and then three per cent after 2019.