A five million-strong army of self-employed workers has no faith staff pensions are the safest way to save, according to official statistics, as a Government manifesto pledge to ensure the rising tide of freelancers is ready for retirement fails to bear fruit.
Among those who work for themselves just 15pc think paying into an employee pension is the best way to guarantee an income in retirement, Office for National Statistics research covering July 2016 to December 2017 found. This compares with 44pc among those who are employed.
Low trust in workplace savings from the self-employed may be expected given employer pensions are not available to them, the ONS said.
But research from IPSE, a trade body for the self-employed, in May found fewer than one in three (31pc) freelance workers are currently paying into any pension at all. Taken together, the ONS and IPSE figures point to millions being at risk of lacking a decent income in later life, a problem that is growing as the number of self-employed swells.
The Government pledged to tackle the issue of self-employed pensions in its manifesto last May, saying “we will continue to extend auto-enrolment to small employers and make it available to the self-employed”.
But it has still yet to put forward any specific plan to enact this.
Self-employed worker numbers have jumped in recent years from 3.3 million people (12pc of the labour force) in 2001 to 4.8 million (15.1pc of the labour force) in 2017.
Under “automatic enrolment” all employers must pay for a pension on behalf of their staff. The policy is intended to bridge the savings gap that means many people will have little or nothing to live on in old age.
The rules, which were conceived a decade ago, did not include anticipate the boom in self-employed working and stated the self-employed are not required by law to enrol in a workplace pension.
Self-employed workers who plan to rely on the state pension may also be disappointed as their numbers grow.
For every one million people moving from being employed to being self-employed, £2.8bn is lost annually from national insurance contributions, which fund the state pension, according to a report from pensions firm Aegon.
The Taylor Review into working practices, published last July, called on the Government to improve pension provision among the self-employed, including auto-enrolling them into a pension and administering this through HMRC’s tax self-assessment process.
In its response in February, the Government said it would carry out “feasibility work, and will seek to evaluate these interventions and consult on next steps before the end of this parliament”.
The Department for Work and Pensions reiterated its commitment to increasing pension provision among the self-employed in its corporate report, published in June.
“[The DWP plans to] take forward wider work to explore ways of increasing retirement saving among the self-employed, and to engage with stakeholders on the proposals set out in December 2017 to extend coverage and increase contributions in the mid-2020s,” it stated.
The ONS figures suggested self-employed people are considering other provisions for life post-work. Investing in the property for retirement (42pc) was viewed as a much better option, despite property investments generally lacking the same perks as pensions such as government tax-relief and employer contributions.