Self-employed pensions savings is rising – but it’s not enough

by | Nov 14, 2023

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  • Self-employed pension contributions have increased by £300 million and more self-employed workers are contributing, iSIPP analysis shows
  • Estimated net cost of pension income tax and National Insurance contribution relief is £68.8 billion

Self-employed workers have increased pension contributions by around £300 million with more self-employed people saving for retirement – but they still lag massively behind employees, new analysis from pension provider iSIPP shows.

Government data shows total annual individual contributions by self-employed workers into personal pension schemes including workplace schemes are around £2.3 billion compared with £2 billion previously. 

The most recent HMRC data shows total annual individual contributions from employees and self-employed workers excluding employer contributions rose to £11.9 billion from £11.7 billion. 

 
 

The rise in self-employed contributions also includes a rise in the number of self-employed people contributing to 340,000 from 330,000, iSIPP’s analysis shows. Currently around 4.24 million people are self-employed in the UK. 

Self-employed contributions and participation in retirement saving still has a long way to go to match levels of contributions from employees as well as historic levels of participation by the self-employed in retirement saving.

Industry data shows private pension participation by the self-employed was as high as 33% in 2004/05 before dropping to 14% in 2014/15 compared with 57% of private sector employees in 2004/05 and 81% in 2014/15. 

 
 

The analysis by iSIPP, a service designed to support UK and international customers to consolidate their pensions, found the estimated net cost of pension Income Tax and National Insurance contribution relief is £48.3 billion.

iSIPP’s service is particularly suited to the self-employed and contractors or those who have become self-employed recently as they can combine all their existing pensions into one.

It enables customers to sign up easily at www.isipp.co.uk to consolidate pension funds into one pot, choose their preferred investment funds and monitor how they are performing 24/7 online, with complete transparency on fees and charges. It also helps individuals and their employers to make contributions.

 
 

The free to set up service has no dealing charges or charges to transfer in existing pension funds and enables clients to create their own investment portfolio complementing its existing ‘Choice’ range of Ready-Made funds from world-leading fund managers BlackRock and Schroders.

SIPP Managing Director Hrishi Kulkarni said: “The rise in individual annual contributions by the self-employed is very welcome with more people putting aside more for retirement. But it does not tell the whole story or show the whole picture of pension saving.

“The self-employed do not of course benefit from employer contributions to their pensions and the money paid by employers into pensions is a major part of retirement saving in the UK.

 
 

“The self-employed may also have built up retirement savings from previous employment and while they are not currently saving can benefit from consolidating their funds into one potentially improving returns and reducing fees.”

iSIPP’s digital pension consolidation service is available to all customers with UK pension funds who are working or have worked in the UK. Built around flexibility, iSIPP provides access to over 100 funds under its ‘Create’ option allowing users to build their own portfolio. Its ‘Choice’ range include Ready-Made Portfolios from world-leading fund managers BlackRock and Schroders. BlackRock’s multi-asset, risk-managed MyMap range of funds are available which include an ESG fund and iSIPP also provides access to the Schroders’s Shariah compliant fund. Focusing on transparency, the annual trust fee is £200 plus a 0.25% platform services fee. Funds with OCF (Ongoing Charges Figure) start at as low as 0.17%.

iSIPP is not authorised or regulated to provide financial advice. This article is for information purposes only and should not be construed as financial advice or as a personal recommendation. Pension rules are subject to changes in the future. As with all investing, your capital is at risk. The value of your portfolio with us can go down as well as up and you may get back less than you invest.

 
 

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