4.2 million self-employed under saving for retirement

Almost 5 million people are classed as self-employed in the UK, an increase of 162,000 compared to a year ago, according to new research by AJ Bell.

An estimated 14% of this cohort are saving into a pension, meaning six out of seven of the self-employed – or 4.2 million people – face working longer, or living on less in retirement.

AJ Bell suggests that business owners might consider paying directly from their business into a pension.

Pension contributions would be business expenses, so their companies would get corporation tax relief of 19%. Choosing to make a payment into a pension, rather than taking profits as dividends, then also saves income tax, though this option isn’t open to sole traders.

AJ Bell senior analyst, Tom Selby, commented: “While automatic enrolment is slowly addressing chronic under saving among the employed population, it does absolutely nothing for the self-employed.

“As the rise of the ‘gig economy’ drives substantial increases in the number of self-employed workers, the UK risks fragmenting between those who have a pension and those who do not.

“The Conservatives’ pledge to extend auto-enrolment to the self-employed has so far proven an empty promise, meaning millions of people risk being left behind, and facing penury in retirement.

“This retirement income gap will be further compounded by planned state pension age increases to 67 by 2028, and 68 by 2037.”

AJ Bell has suggested one of the biggest benefits of making personal savings into a pension is the bonus added through tax relief.

Tax relief is automatically added at 20%, while higher rate taxpayers, at 40%, or additional rate taxpayers, at 45%, can claim up to an extra 20% or 25% through their tax return.

    Share Story:

Recent Stories


FREE E-NEWS SIGN UP

Subscribe to our newsletter to receive breaking news and other industry announcements by email.

  Please tick here to confirm you are happy to receive third party promotions from carefully selected partners.


Helping the credit challenged get mortgage ready
A rising number of borrowers are finding it harder to access mortgages due to being credit challenged - whether that’s from historic debts, a county court judgment, or having little to no credit history.

In the latest episode of the Mortgage Insider podcast, Phil Spencer is joined by Eloise Hall, Head of National Accounts at Kensington Mortgages, and Alastair Douglas, CEO of TotallyMoney.


Inside the world of high net worth lending
The mortgage market continues to evolve, and so too does the answer to the question: what is a high net worth individual in today’s market? In this episode of the Mortgage Insider podcast, host Phil Spencer is joined by Stephen Moroukian, Head of Product and Proposition for Real Estate Financing at Barclays Private Bank, and Islay Robinson, founder and CEO of Enness Global. Together, they explore what brokers really need to know when supporting high net worth individuals.

The future of the bridging industry and the Autumn Budget
MoneyAge content editor, Dan McGrath, is joined by head of marketing at Black & White Bridging, Matt Horton, to discuss the bridging industry, the impact of the Autumn Budget and what the future holds for the sector.