Engaging the self-employed in saving for their future

28 January 2019

Julia Peake, National Account Manager, reflects on a report published by the Department for Work & Pensions and discusses how we can engage the self-employed with their pension savings.
The government has spent the last few years focusing on auto-enrolment, and rightly celebrating the huge strides made in getting the UK workforce saving into pensions. However, the self-employed community has been largely ignored, and with nearly 15% of the UK workforce now classified as self-employed, that’s 4.75 million people who do not qualify for an auto-enrolment scheme and face their own challenges when it comes to saving into a pension.

Who are the self-employed?

In their 2018 report “Enabling retirement savings for the self-employed: pensions and long-term savings trials”, the Department for Work & Pensions (DWP) recognises the issue, and adds some colour to the growing size of the problem.
Self-employed individuals are defined as sole proprietors, partners, or directors of limited companies where they are the only, or one of very few shareholders. Traditionally, most self-employed occupations centred on building and construction related roles, hairdressing and caring. But over the last 15 years, we’ve seen a rise in people entering self-employment within professions such as IT, banking and advertising. Data also shows that they are typically older than members of the employed workforce, and there is a higher net growth of women entering self-employment in recent years.
According to the Office for National Statistics (ONS) Labour Force Survey (figure 14), the fastest growing sector of self-employed by qualification are those with a degree or equivalent, rising 141% in the last 15 years. Clearly this is a client segment which should be commanding more of our attention.

The wealth of the self-employed

The DWP report states that the self-employed earn less that than their employed counterparts, and they also contribute less to a pension, with 79% of employed people between age 40 and 59 saving into a pension, versus just 37% of the self-employed.
Interestingly, though, a larger proportion of the self-employed have net property wealth of £250,000 and above than those who are employed.
This graph gives a fascinating breakdown of wealth by age and employment:


Expand the chart.

What does this mean for advisers?

This trend in the UK workforce looks set to continue, and we think this presents an opportunity for advisers. There are various hypotheses that could be drawn from the DWP’s report:

  • The rising numbers of experienced professionals entering self-employed/ consultancy roles comes at a point in life when people believe the benefits of self-employment outweigh the risk of reduced income and pension savings.

  • The catalyst for this could be less pressure on disposable income (such as children leaving full time education), or the realisation that they have the security of other forms of wealth, such as property.

  • Those new to self-employment will be focused on establishing their company over sorting out their own pension, protection and health insurance. Ironically, these become more important when you’re working for yourself.  They may have been used to having company pensions and may hold the belief that those pension savings are enough to fund their retirement.

 With the DWP trialling several marketing initiatives with trusted organisations to reach out to those with existing pension savings and liaising with trade unions and their members to raise the profile of pensions for the self-employed. Advisers have the ideal opportunity to be part of this campaign and actively focus on this client segment by helping those already in self-employment, but also those thinking about making the move, giving them the financial confidence to consider not only how to protect themselves and their businesses but also how to save for their future.

How can Sanlam help?

Sanlam offers a range of pension wrappers, from a personal pension, full SIPP and for those who may have previous protected pension savings, an open architecture Section 32 contract. We also have a range of different investment options to meet your client’s attitude to risk and their requirements.
At Sanlam, we offer special terms when our OneSIPP is used with our DFM services. This could provide your client with a bespoke investment service with an inexpensive pension solution that meets your investment and retirement requirements. To find out more about these terms and how Sanlam can help you and your clients further, please speak to your regional development manager or visit our financial adviser page.

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