Self-Employed Face Significant Retirement Risks
Many self-employed workers, Gen Z, and low to middle-income earners in the UK face serious retirement challenges due to inadequate pension savings and lack of auto-enrolment protection.
A Closer Look at the UK’s Retirement Savings Gap
A recent industry survey has brought to light a worrying trend: a significant portion of self-employed individuals, as well as younger and lower-income earners across the UK, are at increasing risk of financial insecurity in retirement. While the past year has seen some improvement in overall pension saving rates, with projected annual retirement income rising from £15,500 to £17,200, these gains have not been sufficient to keep up with the rising cost of living.Groups Most at Risk: Gen Z, Low and Middle Earners, Self-Employed
The latest Scottish Widows Retirement Report offers a detailed snapshot of the groups experiencing the greatest challenges:Gen Z’s Financial Balancing Act
Many young adults save into Defined Contribution pensions through their employers. Yet, they face competing financial priorities, such as:- Building emergency funds
- Saving for a home deposit
- Managing student debt
- Funding holidays and personal goals
- Millions remain outside the automatic enrolment system for workplace pensions
- 51% are at risk of not covering basic needs when they retire
- Only 25% are on track to achieve a minimum standard of living in retirement
- 39% believe they are not saving enough
- 23% admit to saving nothing at all for retirement
- Review your current pension contributions and increase them where possible
- Set clear savings goals, prioritising retirement alongside other major milestones
- Seek professional pension and financial planning advice, particularly if self-employed
- Explore joining private pension schemes or group personal pension plans
- Stay informed about upcoming policy changes relating to auto-enrolment and pensions
These competing needs, coupled with standard pension default contribution rates, leave many Gen Z savers exposed to long-term shortfalls.
Low to Middle Earners Contributing the Bare Minimum
Those earning between £20,000 and £35,000 per year—predominantly in their 30s—are, according to the report, most likely (46%) to contribute only the mandatory minimum of 8% into their workplace pensions.Key challenge:
Minimum contributions often result in insufficient pension pots to maintain living standards in retirement.
Self-Employed Largely Overlooked by Automatic Enrolment
The self-employed sector remains notably disadvantaged:Comparison Table: Pension Outlooks
| Group | At Risk (%) | On Track for Minimum Lifestyle (%) | Saving Nothing (%) |
|---|---|---|---|
| Self-Employed | 51 | 25 | 23 |
| Low/Mid Income (30s) | -- | -- | -- |
| Gen Z | -- | -- | -- |
Expert Insights and Policy Implications
According to Pete Glancy, Head of Pensions Policy at Scottish Widows:“Our research couldn’t be more timely, spelling out just how crucial targeted measures are in preventing millions from living in retirement poverty in the coming years.”
He emphasises three critical policy areas needing urgent attention:
1. Expanding auto-enrolment to include the self-employed
2. Encouraging higher pension contribution rates
3. Addressing home ownership and affordable housing as part of holistic retirement planning
What Can Self-Employed and Contractors Do?
It’s clear that taking early, proactive steps can mitigate some of the risks described above. Consider the following actions:The Takeaway for Contractors and the Self-Employed
With nearly half of self-employed people at risk of retirement shortfalls, now is the time to review and strengthen your financial plans. Seeking expert guidance can help secure your long-term future and reduce vulnerability to cost-of-living increases.Categories
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