More than half of self-employed pension savers have paused or reduced their contributions due to the pandemic, risking problems later down the line, Unbiased has warned.
Research from the adviser directory found that a mere 49 per cent of self-employed people have any pension savings at all while many are not paying into a pension scheme at present.
It found that the primary cause of reduced flow into pensions was due to a loss of income – a direct consequence of the pandemic, lockdowns and inability to work.
A study from the Enterprise Research Centre found that one in five self-employed people are in sectors most at risk of loss of livelihood due to the crisis.
Unbiased polled 200 owners of one-person businesses in February 2021.
Of the respondents, 58 per cent of self-employed people had no current pension, whilst 12 per cent had suspended payments due to the impact of Covid. A further 10 per cent had decreased their payments but were still contributing regularly.
A mere 18 per cent had maintained their regular contributions throughout the pandemic, whilst 2 per cent had increased their rate of pension saving.
Among those self-employed people who regularly save into a pension, the average contribution was 4.1 per cent, almost half the rate paid by employees who are auto-enrolled into a workplace pension scheme.
Karen Barrett, CEO and founder of Unbiased, said: “The self-employed community have been among the hardest hit financially by the lockdown. When your regular income becomes uncertain, it’s natural to want to economise where possible on non-essential spending.
“The problem is pension contributions aren’t non-essential spending – because your pension is what will pay for your essential spending when you retire.
“So although taking a contribution holiday now might seem prudent, in reality it’s just kicking the problem into your future.”
The survey also found that only one in three self-employed people saw private pensions as being one of their four main sources of income in retirement, whilst 70 per cent expected the state pension to be their main source of income.
More than half expected to continue working past the age of 66.
Last month, Guy Opperman, pensions minister, reaffirmed the government’s commitment to supporting self-employed people’s pensions in the wake of Covid-19, saying the government “remains committed to increase retirement saving.”
“There is no straightforward single mechanism, supported by evidence, to bring self-employed people into pension saving, but we continue to urge individuals to avail themselves of the opportunities that do already exist for pension saving."
The Department for Work and Pensions has been conducting trials for behaviourally-based savings mechanisms alongside Nest Insights, the research arm of Nest Corporation.
Paul Cox managing director at Pure Wealth Management, said an area of concern was individuals who "pause contributions for the short term, but fail to recommence them."
He said: “A financial adviser can help assess affordability and control contribution levels as well as income levels to ensure that important income targets are not sacrificed. The cost of delay has been discussed for years now, unfortunately the impact of missing contributions isn’t often seen or felt until it is too late.”
