Millions of self-employed workers are missing out on retirement cash windfalls because they are not saving into a pension.
They are left to fend for themselves financially while millions of employed workers are automatically enrolled into company pensions.
The lack of saving could mean they are losing £450,000 of retirement income.
Pension provider Aegon has calculated the self-employed need to put at least 5% of their salary into savings each month to provide a comfortable income when they stop working.
Employees contribute 3% of their earnings, topped up with another 2% from their employers.
Pension options
This goes up to 5% of earnings for employees with a 3% employer bonus from April 2019.
Aegon says a 22-year-old self-employed worker with a 46 year saving history could lose £447,188 retirement income if they do not put money into a pension at the same rate as an employee and their firms.
The self-employed cannot opt for auto-enrolment, but can contribute into a personal pension, stakeholder scheme or self-invested personal pension (SIPP).
All these schemes come with a tax relief boost on contributions of up to £40,000 a year, unless they earn more than £100,000, when the annual limit tapers to £10,000.
Kate Smith, head of pensions at Aegon said: “More employed people are saving for retirement and these people are putting more money away.
“But fewer self-employed people are putting money away and they’re putting less cash aside. We don’t want to see these people not have enough savings to be able to retire.”
Working until they drop
The latest official figures show the self-employed save an average £4,490 into a pension in 2016-17, down from £5,310 the year before.
Some pension experts are calling for auto-enrolment to be extended to the self-employed.
Helen Morrissey, a pensions specialist at pension provider Royal London, said: “Millions of self-employed people could face working until they drop simply because they cannot afford to retire.
“The government has taken action to get millions of employees into pensions, but five million self-employed risk being a forgotten army.
“The government needs to stop dithering – it had a review last year and agreed to look at this issue but nothing has happened.
“Meanwhile, millions more self-employed are set to face a grim retirement unless action is taken.”
