Are you building your pension pot?

As traction grows around the Taylor Review, there are an increasing number of people calling for a new auto-enrollment option for self-employed workers.

Nixon Williams has reported that up to three million self-employed workers have turned their backs on building up their pension—the number rising by 12% in just one year.

“These findings show a clear and growing disparity between the pension contributions from private sector workers and the self-employed.”

 Nixon Williams’ survey involved data from 1,000 contractors and freelancers around the country.

Of the 1,000 participants, 64% of the self-employed in the UK are avoiding putting money aside into a personal pension scheme. Considering the fact that there are an estimated 4.5 million self-employed workers in the UK, this amounts to around 2.9 million of them deciding against pension schemes.

The accountancy firm’s report continued: “In stark contract to the self-employed figures, government data published earlier this month revealed that 81% of private sector workers – some ten million – are now paying into workplace pension schemes, thanks to the introduction of auto-enrollment in 2012.”

“These findings show a clear and growing disparity between the pension contributions from private workers and the self-employed,” Derek Kelly, CEO of Optionis (owns Nixon Williams), added.

He said: “Speaking to the contractors and freelancers we work with day-to-day, we find that one of the biggest barriers to enrolling in a private pension scheme is the fact that they render their earnings completely inaccessible until at least the age of 55.

“Working on short-term contracts or projects makes [pension schemes] an unattractive option for many self-employed people, with many preferring to keep spare earnings close at hand for a rainy day, or to help with periods when they may be between contracts.”

The age bracket that has been found to be the least likely to pay into a pension scheme is those aged between 31-40, with only 44% of them paying into a pension scheme of some kind.

Conversely, respondents aged between 41-50 proved to be the most likely to incorporate a pension scheme into their long-term saving plans.

Furthermore, 59% of respondents in this age bracket admitted expecting to work past the age of 64.

“Working on short-term contracts or projects makes [pension schemes] an unattractive option for many self-employed people, with many preferring to keep spare earnings close at hand for a rainy day, or to help with periods when they may be between contracts,” Kelly said.

“The Department for Work and Pensions announced last year it was developing new ways to include self-employed workers in pension schemes, taking advantage of one of the last remaining tax breaks post-IR35, but we are yet to see how that will materialise into actionable change.”

Kelly continued: “Without any real action, there is a danger that this trend will continue. For some, it may be a choice, but, for others not planning for their retirement, it could mean [that they are] still working will into their 70s, or even 80s.

“The Department for Work and Pensions announced last year it was developing new ways to include self-employed workers in pension schemes, taking advantage of one of the last remaining tax breaks post-IR35, but we are yet to see how that will materialise into actionable change.”

The Optionis CEO concluded: “We await that with interest, but it is very clear to us that more needs to be done to make personal pensions more attractive to the millions of hardworking contractors and freelancers that play such a vital role in our economy.”

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