Skip to Content

Blogs Spectator Money

Act now to avoid the pensions time bomb

One of the starkest trends in recessionary Britain is the ever expanding army of the self-employed.

Among the staggering 4.4 million people who work for themselves are 166,000 taxi drivers, 140,000 carpenters and joiners and 123,000 farmers, as well as more prosperous lawyers and computer contractors. These workers have few perks: no paid holidays or sickness cover.

They make up one seventh of the workforce but, also, sadly, according to the Department for Work and Pensions 22 per cent of them have no pension. My own family experience bears this out. I am one of the youngest in a family of seven children: four siblings are self-employed, but only one has an adequate pension. Paying the mortgage and university fees for the children are always more pressing.

When you are young, retirement is unimaginable because no-one wants to think about the last taboos: old age and death. The public’s ignorance is also shocking. Seven in ten people are unaware that they are entitled to tax relief on pension savings according to Citizens Advice research, and many don’t realise that there is no need to make a regular pension contribution, regardless of the state of their business.


A huge swathe of the working population is completely excluded from the auto-enrolment reforms which are currently sweeping millions of employees into workplace pensions. While the self-employed have benefited from the new flat rate state pension since April 2016, private pensions are deemed an expensive luxury, producing dismal returns, and independent financial advisers have trouble reaching out to this group.

I can see no easy answers to the plight of the self-employed, other than compulsory pension saving from the income tax threshold of £11,000, or at the very least HM Revenue & Customs auto-enrolling them into the National Employment Savings Trust or other low cost schemes. Or maybe the new Lifetime ISA aimed at the under 40s announced in the March Budget and launching in April 2017.

A policy of simply hoping that self-employed people will sort out their own pension arrangements seems doomed to failure.

Two influential reports have recently highlighted the plight of the self-employed: ‘Britain’s forgotten army’ from Royal London and ‘Going it alone, moving on up: supporting self-employment in the UK’ from the Federation of Small Businesses. But response from the Government has been muted.

And it is not just pensions. The self-employed are often excluded from financial services like mortgages or personal insurance and income protection is extremely costly. There are other missing benefits that employees take for granted – why not increase the maternity allowance so it is in line with the more generous statutory maternity pay?

Policymakers have been slow to react to the changing labour market yet extending help to the self-employed must not be put in the ‘too difficult box’ as there is a real risk that millions are heading for poverty in retirement unless action is taken.

The self-employed are the powerhouse of the UK economy and deserve the nation’s support.

Stephanie Hawthorne is Editor of Pensions World magazine


Show comments
Close