Just a tiny fraction of the UK’s self-employed workforce is saving into a pension pot, as millions are left with no safety net for retirement.
- Just 4% of wholly self-employed workers save into a pension, compared to 17% across the wider self-employed sector
- The SPP blames bad design, not bad choices, pointing to no employer contributions, no payroll defaults, no system built for irregular income.
- Reform isn’t expected until 2027 – so self-employed workers should start closing the gap themselves now.
Just 4% of wholly self-employed workers in the UK are currently saving into a pension. That’s according to research from the Department for Work and Pensions, which also found this number only jumped to 17% for the wider self-employed workforce.
So what’s driving this rift? According to the Society of Pension Professionals (SPP), it’s not down to bad choices, but bad design.
In their new paper, they argue that workers outside of full-time employment don’t benefit from the same automatic defaults employees do, creating an “obstacle course” for the self-employed looking to grow their own nest egg.
However, while the SPP is urging the government to make systemic changes, individuals don’t have to wait for reform to start closing the gaps themselves. We cover how sole traders, freelancers, and business owners can start prioritising their pension pot, one small step at a time.
Why are the self-employed falling through the cracks?
Automatic enrolment has been one of the UK’s biggest pension success stories, by turning saving into the default for millions of employees. However, that success has a blind spot. It was built entirely around payroll.
A new paper by the SPP, The Missing Millions: Rethinking Pension Policy for the Self-Employed, is calling for a fundamental rethink of how the UK helps self-employed workers build financial security for retirement.
With just 4% of wholly self-employed workers actively saving for a pension, they note self-employed workers face an “obstacle course” when it comes to saving, compared to the “escalator” employed workers benefit from.
As they explain, for this subset of workers, there’s no employer contribution or payroll mechanism to make saving second nature. This is compounded by the ‘lumpy’ income patterns of freelancers, which make fixed monthly contributions even harder to commit to.
What could actually fix it?
The SPP’s paper doesn’t point to one silver bullet, but a menu of potential fixes. This includes using the tax system to create a default route into saving, developing flexible “autosave” models through banks and accountancy platforms, and extending existing DC master trusts (or a new state-backed scheme) to cover the self-employed.
Martin Willis, chair of the SPP’s self-employment working group, points to finding a “simpler, more flexible route to retirement saving”.
“If Automatic Enrolment defined the pensions reform of the last generation, finding a solution that works for the self-employed should be at the heart of the next”, he argues.
As the conversation around pension reform for the self-employed heats up, and major banks consider streamlining the process with automatic features, there’s growing momentum behind fixing this problem at a structural level.
Yet, the Pensions Commission isn’t due to publish its final recommendations until 2027, so self-employed workers would be wise to avoid waiting on reforms to safeguard their future finances.
- Open a pension built for variable income – A Self-Invested Personal Pension (SIPP) is easy to set up, and lets you pay in as much or as little as you like
- Treat pension contributions like a business expense – Consider building a rough percentage of every invoice into your pricing. Even 5% can make a difference.
- Set a yearly review – Revisit contributions annually, ideally around your tax return, to check whether your savings are in line with your earnings.
