Self-employed workers are being left behind by pension reform that requires employed people to be automatically enrolled into a workplace pension.
As automatic enrolment celebrates its fourth anniversary this month with the news that some 6.5 million workers have been automatically enrolled into a pension, new data from the Office for National Statistics (ONS) shows that just one in five self-employed people are saving for their retirement with a pension.
Although self-employed people do not get the benefit of employer contributions, NEST, a provider of workplace pensions says that they are missing on tax relief on their contributions and investing growth, putting them at risk of retirement poverty.
Debbie Gupta, executive director of corporate services at NEST, says: “Auto enrolment has started a pension revolution, reversing the decline in pension saving and giving millions an opportunity to save for their retirement. It’s great to see the difference it’s making. In the last four years over 6.5 million workers have started saving for their future. However, there’s a risk that millions of self-employed workers are getting left behind.”
She adds: “Saving a little bit each month can soon add up, particularly when you add on tax relief and investment returns. Pension savings, combined with the state pension can make a real difference to retirement. We all want to carry on doing the things we love - whether that’s going out for dinner, trips to the cinema or maybe even a week in the sun. Having a pension could go a long way to helping achieve those aspirations.”
According to figures from NEST, a 22-year old on average earnings of £22,900 could have pension worth £150,000 by the time they retire under auto-enrolment.
So far, less than 10% of the 6.5 million employees that have been auto-enrolled have opted out of the scheme.