The Self-Employed Need a Pension Review More than Ever

How Bad is it?

In a word, it’s bad. To get a sense of perspective regarding the problem we can look at general figures for pensions in the U.K. rather than simply concentrating on the self-employed. There are numerous studies. As an example, research commissioned by found that:

+ 35% of the adult population say they don’t have a pension.

+ 43% of the population admit they don’t know how much they will need.

+ Over half (55%) of people estimate that up to £100,000 is enough to retire comfortably.

+ Only 28% of people think they are on track to meet this.

+ The recommended amount for a comfortable retirement is £260,000–£445,000, depending on accommodation costs.

As another example, the Department for Work and Pensions (DWP) released data in November 2019 which revealed that of the 1.1 million people who receive the new state pension, only 44 per cent or just under 500,000 pensioners receive the full amount of £168.60 a week or £8,767.20 a year.

Whilst no recent studies have concentrated specifically on the self-employed, it can certainly be reasonably assumed that their situation is not a positive one and is probably far worse with regard to pension planning than that of the population as a whole.

The Recent Impact of Covid

In my opinion, a key reason for the lack of retirement planning is that, very often, the self-employed can become emotionally attached to their business. This can mean that they can see their business as their pension provision in retirement rather than as simply as an enterprise. Unfortunately, this emotional attachment can present a concentration of risk.

With Coronavirus set to cause mass redundancies and unemployment in the U.K. in 2020 and 2021 it can also be reasonably assumed that risk is heightened in the self-employed sector with large numbers of businesses predicted to fail.

Their plight, however, may be less visible to the observer than that of the employed. In many cases, the impact of the virus will be felt, not by unemployment, but in other ways. For example, a contractor could experience a drop in revenue or temporary periods when his or her work dries up (both of which are harder to detect in real-time in national figures than those of workers on the PAYE system).

Let’s Start by Defining the Problem

Although the self-employed usually speak with an accountant annually in order to prepare tax returns and final accounts, unfortunately, their accountant most often overlooks the personal financial issues of his or her client when providing advice.

Much as a doctor starts with a diagnosis, in the opinion of the author, it is best to start by identifying and assessing the problem in each individual case. For this reason the author would propose a pension review. This can be done as an excercise without outside help by the individual by him or her collating their documents and approaching each pension scheme he or she has for information. Alternatively, most regulated U.K. financial advisers would do this on behalf of a client based on a signed Letter of Authority and would provide detailed feedback to their client afterwards regarding their findings.


The self-employed of the U.K. are the lifeblood of the economy, yet, it would seem that millions have not been setting aside money for their sunset years even prior to Covid and are sleepwalking towards a desperate or grey retirement. This is a future which could be avoided or at least improved upon.

I would encourage a pension review as the first step towards individual solutions. Only then can possible solutions be found. A look at budgeting, personal expenses, tax-planning, investments and pension planning cannot be started without that ‘first step’. Solutions can then be implemented either at the individual level and, ideally, with the assistance of regulated professionals.

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