A new report by the national charity the Citizens Advice Bureau has highlighted that the self employed in the UK are being left behind in the nation's push for more and more people to invest in pensions for their retirement. Instead, evidence points to the fact that the self employed would rather invest in savings accounts than persons, with property and cash ISAs more popular too.
The research was based on a survey of 65 self employed people as well as a number of focus groups composed of the self employed. Three clear issues were identified as being barriers to the self employed investing in private pensions:
- Not enough information - 27% of self employed people said that they have never had any information concerning pensions or related matters from anyone.
- Lack of trust - 50% of self employed people saw pension saving as a risky investment, and saw property and cash as much safer.
- Lack of understanding - 67% of the self employed said that they do not understand the tax breaks that can be offered by private pensions and cash ISAs and 25% thought wrongly that ISAs were a better investment in terms of tax breaks than a pension.
This will not make comfortable reading for the government. The introduction of auto enrolment has undoubtedly been a success, with millions of people due to be auto enrolled into workplace pensions and with just a 10% opt-out rate, it's more successful than anyone ever thought. However, this is somewhat tarnished by the information in the study above, because the self employed are not part of the auto enrolment process, and there are currently no plans for a similar scheme to be set up for them. The numbers of self employed are growing too, with an increase of 32% of people being self employed from 2001, the total number now numbering 4.5 million. Over the same period, the number of those self employed people contributing to a pension has decreased on 1.1 million in 2001 to just 450,000 in 2013/14, a dramatic drop of more than 50%.
Chief Executive of Citizens Advice, Gillian Guy said:
"People who work for themselves are missing out on the financial security offered by a pension. It is really important that self-employed people are offered up front information about how pensions can work for them so they can make an informed choice as to the best retirement savings plan. Paying into a pension also needs to be made easier and come with similar incentives for self-employed people as those currently enjoyed by employees."
Whether the government will take action on this issue and if they do what that action would be is unclear, but there are various options including an opt-in pensions system on tax self assessment forms, government matching pensions contributions or a standalone auto enrolment type scheme for the self employed.