Many self-employed workers at risk of retirement challenges

A new survey has revealed that, along with Gen Z and low to middle-income earners, many self-employed workers are at risk of retirement challenges.

Although data shows that pension saving levels have increased over the last 12 months, with projected retirement income rising to £17.2k from £15.5K, they have failed to keep pace with the cost of living.

The Scottish Widows’ latest Retirement Report has highlighted major concerns for Gen Z, low to middle-income earners and self-employed workers.

With regard to Gen Z, most young adults will be saving into a Defined Contribution pension through their employer, as well as relying on personal savings and the State Pension.

However, competing financial goals makes retirement savings a challenge and their main savings goals revolve around emergency funds, house deposits and holidays.

The default contribution rate will also leave minimum savers vulnerable. Squeezed low to middle earners, those on an income between £20,000 and £35,000 and in their 30s, are most likely (46%) to contribute the minimum 8%.

Millions of self-employed workers in the UK are still not included in the automatic enrolment, which immediately puts them at a disadvantage.

Figures show that 51% are at risk of not being able to cover their basic needs in retirement, and just 25% are on track for a minimum retirement lifestyle.

Two in five (39%) self-employed workers believe they aren’t saving enough for retirement, with 23% not saving anything at all.

Commenting on the findings, Pete Glancy, Head of Pensions Policy at Scottish Widows, said, “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.

“The second phase of the Government’s Pensions Review must be broad enough to take a holistic view on people’s financial journey through life, considering wide-ranging financial goals. There are three key areas that must be addressed urgently: auto-enrolment, self-employed contribution rates and housing, considering both home ownership and affordable housing.

“For now, the challenge is helping people make the most of what they have. It is essential to ensure people feel financially empowered to make informed decisions and take proactive steps for their future – with a strong sense of financial independence playing a key role.”

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