HMRC have released figures that reveal self-employed pension savings have hit record lows across 2019/2020. Since 2012 to 2013, non-eligible employee participation has increased to 34%. However, this has declined for the self-employed to 16%.
In 2019/20 self-employed people paid around £830m into their personal pensions. Though, this figure is down from the £1.15bn paid in the previous year.
It is thought that due to the COVID-19 pandemic, this figure would have reduced even further between the 2020/21 tax year. A number of people may not have been able to access Government help if they were left without work due to Covid. It is thought that pension contributions may have been sacrificed in order to manage the demands of the pandemic
HMRC’s figures also show that despite a steady increase in people becoming self-employed, pension contributions have been declining over the past 20 years.
In 2001/02 people contributed around £2.5bn, peaking at £3.5bn in 2007/08. However, since 2012/13 this figure hasn’t risen above £2bn.
As a result of the government’s auto-enrolment scheme, all eligible employees are now automatically signed up to a workplace pension. In 2020, there were 88 per cent of eligible employees saving into a workplace pension.
The self-employed however have to set up a pension plan themselves.
There are calls for the government to find a way to increase these figures, to avoid many being in a retirement disaster. What this sort of scheme would look like though, could prove tricky to refine. At the very least people should be aware of the importance of retirement savings.