A new report from the Office for National Statistics (ONS) looking at private pensions in Great Britain from April 2018 to March 2020 has highlighted the dramatically different retirement savings statistics of employed and self-employed workers.
The research found that, in the timeframe examined, just 20 per cent of self-employed workers paid into private pension schemes, compared to 80 per cent of full-time employees. The ONS pointed out that, while private pensions are a tax efficient saving method, a lack of employer contributions means that the self-employed are less incentivised to use them.
The research also found that the gap between pension contributions made by employed and self-employed workers has widened over recent years. Between 2006 and 2008, slightly under 60 per cent of employees paid into a private pension, compared to over 40 per cent of self-employed workers. Since that time, employee contributions have seen consistent increases, compared to a consistent decline among the self-employed.
Regarding the reasons they didn’t pay into pension schemes, 39 per cent of self-employed workers said they could not afford to, compared to 26 per cent of employees. 17 per cent of freelancers, meanwhile, said they preferred alternative forms of saving, compared to 9 per cent of employees.
However, while average active pension pot sizes among employees have fallen since 2006, they have increased for the self-employed. Although for both groups, there remains a significant gender divide. In 2006-08, average pension pot sizes stood at over £40,000 for male employees and nearly £30,000 for female employees. In the most recent figures, male employee pension pots stood at just over £20,000, while female pension pots were just under £20,000.
Among the self-employed, however, average male pension pots have grown from under £30,000 in 2006-08, to nearly £40,000 in 2018-2020. For female freelancers, they have increased to nearly £30,000 from just over £10,000 in 2006-08.
