Self-employed workers across the UK are opening themselves up to the possibility of a rocky financial future in retirement, as new research has found they would rather put their money in savings accounts, cash ISAs or property than a private pension.
The study, carried out by charity Citizens Advice, said that three core concerns were putting people off the idea, notably a “lack of trust, understanding and information” about pension provisions and the benefits they offer over other more accessible and easily-understood options.
Focus groups comprising self-employed people, alongside a survey, were coordinated by Citizens Advice to put together the list of issues that this group found themselves facing. “Standing in the way” of self-employed people saving into a pension, first and foremost, was that two thirds of those consulted (67 per cent) did not know of the tax breaks provided by cash ISAs and private pensions; one in four (25 per cent) believed that an ISA gave better tax breaks than a pension.
Meanwhile, exactly half of self-employed people said they didn’t trust private pensions as a “safe place” to invest money – undoubtedly due to pension fund collapses during and after the economic crisis – as well as a wholesale lack of information or advice about pensions from anyone.
Citizens Advice said that another significant barrier regarding the take-up of pensions was the perception of administrative burden. To counteract this, the charity is calling on the government to create an “opt-in” pensions system on self-assessment returns, in the same way auto-enrolment is available to those employed by companies.
It also called on the government to increase the amount of information and advice for self-employed people about pension options, allowing them to make better decisions about their savings for the future.
Chief executive of Citizens Advice Gillian Guy said that the financial security offered by a pension was too important to overlook by anyone, and should not be seen as a direct alternative to other forms of saving.
“While property or cash savings may be viable options, people could also benefit from being in a pension scheme,” she said. “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.”