Fears have been revealed of an upcoming ‘black hole’ in pensions for the self-employed due to the depletion of savings after the coronavirus pandemic and, if that happens, it could leave millions of people through. the country in financial difficulty when they reach retirement.
The warning follows statistics showing a drop in the number of self-employed workers contributing to their pensions, with research from the Institute for Fiscal Studies (IFS) showing the figure fell from 48% in 1998 to just 16%. today.
Community, the union representing the self-employed, which shared the new figures, also said that around 67% of self-employed workers have had to use their savings to help with their finances due to the impact of the pandemic on their incomes.
On September 15, marking Retirement Awareness Day, the union called for more to be done to support self-employed workers to ensure they do not face financial hardships in retirement.
Kate Dearden, Head of Policy, Research and External Relations at Community, said: “The UK has more than five million self-employed people. Even before the pandemic, the question of their pensions was rumbling beneath the surface.
“Now, with the coronavirus hitting us all economically and millions of people having to rely on their savings just to get by, this threatens to turn into a real crisis. “
She added: “Pensions can often seem like a distant ulterior motive for many of us, but the reality is that they are something we should all be thinking about. Our population is aging and more of us are living longer. It’s a fantastic thing, but if this pension black hole continues to grow, it will become a time bomb under our country. “
The self-employed make up around 15% of the national workforce and are essential to the UK’s innovative and fastest growing industries such as science, engineering, healthcare, the arts, entertainment , the media and the provision of other important services. Across the country.
This year, the self-employed will contribute £ 125 billion to the UK’s economic recovery.
Community’s research was announced just over a week after the UK government’s health and social care report, which saw an increase in national insurance payments for workers to cap the costs of care social. The change will result in an additional 1.5% reduction in workers’ wages. It also comes on the same day that parliament votes on a cut in universal credit, which the union says will have a disproportionate impact on the self-employed.
Previous research by Community in collaboration with Prospect and the FSB has shown that half of the self-employed lost 60 to 100 percent of their household income in 2020.
Many factors make the self-employed less likely to contribute to their pensions, including the absence of employer contributions, unpredictability of income and declining wages.
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