Growing numbers of self-employed increasingly becoming a 'lost tribe'

Figures released by the Office for National Statistics (ONS) this morning provide the good news that employment is continuing to rise and unemployment continuing to fall.  There are 30.6 million people in work, 167,000 more than for January to March 2014 and 820,000 more than a year earlier.

There is also an indication of a continuing increase in the number of people moving into self-employment, particularly as home workers.  Commenting on the figures, Malcolm McLean, senior consultant, Barnett Waddingham, says:

“It seems there's a growing appetite for self-employment which is not deterred by the financial difficulties that can go with it. There are now over 4.5 million self-employed workers in the UK with little to suggest that the numbers will contract, even if further economic recovery creates more jobs.

“But that growth has almost certainly been matched by a worrying trend away from saving for retirement.  A decade ago two in three self-employed people were saving in a pension; today the proportion is probably under half, based on earlier figures published by ONS.  The problem is particularly dire among self-employed women, the majority of whom currently appear to have no pension savings at all.

“Although being self-employed has many attractions - not least being your own boss with the perceived flexibility, control and increased earning potential that brings with it – when it comes to pensions provision this section of our society is indeed something of a lost tribe.  Currently excluded from the state second pension and auto-enrolment, the self-employed are very much on their own in preparing themselves financially for later life.

“Many self-employed people who are earning a lot of money assume they will be well off in retirement, but unless they have a business that they can sell when they stop working, they face poverty in retirement if they do not start planning now.  Having to survive on the state pension alone is not an appetising prospect that should appeal to many.

“We should continue to stress the importance and provide every encouragement to the self-employed to join a pension scheme at the earliest possible opportunity.  Although they will not be automatically enrolled like many other employed workers they can always ask to enroll themselves in a suitable arrangement such as the National Employment Savings Trust (NEST) and benefit from the valuable tax breaks that the government will provide for them.”