Pension warning for self-employed

BuilderSelf-employed workers are missing out on up to £91,500 because they do not receive employer contributions into their pension, an insurer has found.

Over the course of a working life spanning around 41 years, someone working for a company will receive average employer contributions of £2,232 a year, adding up to £91,512 going into their pension pot, according to Prudential.

Research previously conducted by Prudential among self-employed workers found that almost half (46%) have no private pension savings at all to support them in retirement.

While some planned to draw upon other sources of income when they stopped working, almost a third (29%) of business owners expected to have to rely entirely on the state pension for their income in retirement. The latest findings, which were taken from analysis of official figures, come as the Government's landmark automatic enrolment scheme to eventually place up to 10 million people into workplace pensions is rolled out.

Auto-enrolment is taking place alongside state pension reform, as part of general moves by Government and industry to make retirement saving more attractive and easier to understand amid fears that people are living for longer but not putting enough money aside for their later years.

Stan Russell, retirement expert at Prudential, said: "Self-employed workers have to be even more proactive when it comes to saving for retirement, as they can't benefit from employer contributions in a company pension scheme.

"We know from our research that a significant proportion of self-employed workers have no private pension and will rely solely on the state pension in retirement.

"Often this is because they have prioritised the needs of their business over saving into a pension. However, the state pension alone is not enough for a good standard of living in retirement, which is why saving as much as possible into a pension from an early stage is crucial."

A Department for Work and Pensions (DWP) spokesman said: "Our reforms to the state pension mean that from 2016 the self-employed will have access to a full flat-rate pension, putting them on a par with everyone else. This is good news for the growing number of people in Britain who work for themselves."

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