UK pensions commission warns self-employed retirement saving gap is widening

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UK pensions self-employed gap

Highlights

Pensions Commission interim report finds only 17% of self-employed have a pension, with participation dropping to 4% among those solely self-employed.
The proportion of self-employed saving into pensions is now half what it was 30 years ago, widening the retirement savings gap and highlighting a systemic weakness.
Women in their fifties possess nearly half the private pension assets of men their age, and low- and middle-income earners face the highest risk of inadequate retirement incomes.

Interim findings spotlight self-employed shortfall

As first reported by the Financial Times, the government-backed Pensions Commission is set to say in its interim report that millions of Britons are not saving enough for retirement under the current system. Baroness Jeannie Drake, who heads the commission established in 2025 to examine the adequacy, fairness and sustainability of the UK pensions framework, says the scale of the problem appears greater than previously anticipated.

Drake says many self-employed workers are likely to struggle to fund retirement, while the commission now views this group as a more serious weakness in the system than expected. Data in the report seen by the Financial Times shows only 17 per cent of self-employed people have any pension, dropping to 4 per cent among those whose income comes solely from self-employment.

Sir Ian Cheshire, one of the three pension commissioners alongside Drake and Bath University professor Nick Pearce, says the extent of the self-employed issue is much starker than expected. A House of Commons Library labour market study published in February puts the number of full-time self-employed workers at nearly 3 million, equivalent to about one in eight full-time employees.

Most self-employed workers are excluded from the UK's auto-enrolment scheme, which automatically places eligible employees into workplace pensions. That gap has become more significant as the report notes the share of self-employed people paying into a pension is now half the level of 30 years ago.

Broader inequalities shape final recommendations

The commission's findings also indicate that low- and middle-income earners face the highest risk of inadequate retirement incomes. The interim report highlights further disparities among pension savers, including a gender gap that persists in private pension wealth even as differences in state pension entitlements narrow.

Women in their fifties hold nearly half as much in private pension pots as men in the same age group, according to the report. Sophia Singleton, head of defined contribution pension schemes at consultant XPS, says there is an obvious policy hole for the self-employed because auto-enrolment does not operate as a savings mechanism for them.

The commission intends to build on the work of the earlier Turner Commission, which last reported in 2005 and helped shape auto-enrolment policy. Drake, who also worked on that earlier review, says the current political climate is more divisive, potentially making consensus on the final recommendations harder before they are published next year.

The government has already said it will not raise minimum auto-enrolment contribution rates during this parliament. That position leaves policymakers facing pressure to address pension adequacy through other measures as concerns deepen over retirement outcomes for self-employed, low-paid and middle-income workers.

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