Written by Chris Eastwood, Founder & CEO, Penfold Pensions
The government’s decision to relaunch the Pensions Commission nearly 20 years after it first reshaped the retirement landscape is timely and essential. The warning signs have been building for years, and the latest government figures released on July 21 only confirm the urgency: almost half of working-age adults are saving nothing at all into a pension. More than three million self-employed people have no retirement savings. And unless urgent action is taken, people retiring in 2050 are expected to have 8% less private pension income than today’s retirees.
We are at a crossroads. Either we act now to build a future where people can retire with dignity, or we risk a growing population of pensioners facing financial insecurity.
Automatic enrolment was a step-change for the UK pensions landscape. It brought millions into the system, many saving for the first time in their lives. But it has clear limitations. Contribution levels are too low to deliver a decent retirement income. And too many groups are left out altogether including low earners, part-time workers, women, and, most starkly, the self-employed.
The self-employed have been the most visibly left behind. Unlike employees, they aren’t automatically enrolled, don’t receive employer contributions, and don’t have a scheme set up for them. If they don’t take the initiative to set up a pension themselves, amid the pressures of managing cash flow, irregular income and taxes, they simply go without. And for millions, that’s exactly what’s happening.
Many cite cost, unpredictability of income, and lack of time or knowledge as reasons for not saving. But the result is the same: a generation of sole traders and freelancers sleepwalking toward retirement with nothing but the State Pension to rely on.
This is why the Pensions Commission reboot must prioritise the needs of the self-employed. We need to acknowledge that our workforce has fundamentally changed. Flexible, freelance, and self-directed work is no longer a niche, it’s a core part of the economy. Pension policy needs to catch up.
One simple solution would be to use the existing self-assessment tax return process as a nudge. When a self-employed person files their return, they should be given the opportunity to opt in to a pension contribution at the same time. It’s intuitive, timely, and low effort. And if we paired this with some form of government incentive or match, the impact could be significant.
Of course, addressing the self-employed gap is only part of the picture. We also need to rethink how much people are saving. Today’s minimum contribution rates are widely seen as inadequate. But we can’t ignore the real pressures people are facing in the here and now. Asking low earners to put away more without support could do more harm than good. That’s why any increases must be gradual, and ideally tied to income so those who can afford to save more do so, while those under pressure aren’t penalised.
This is a delicate balance: we need to help people secure their future without making their present harder. But it’s not impossible. With the right policy, technology, and engagement, we can build a more inclusive and effective pensions system.
The relaunch of the Pensions Commission is a golden opportunity. Let’s not waste it by rehashing the same ideas. Let’s finish what auto-enrolment started and bring the entire working population into a system that works for them. Because a retirement system that excludes millions isn’t fit for the future.
The pension time bomb isn’t just ticking. It’s ringing. And now is the time to act.
