The UK’s auto-enrolment system for workplace pensions should not be extended to include self-employed people, a lobby group for independent workers has said.

IPSE – the Association of Independent Professionals and the Self-Employed – instead called on the government and the pensions sector to come up with other ideas to help the self-employed save for the future.

Less than a third (31%) of the UK’s 4.8m self-employed workers are paying into a pension, according to a report published by IPSE. In addition, 67% said they were concerned about saving for later life.

The report criticised the idea of auto-enrolment for freelancers and independent workers, pointing out that only 36% of respondents said they would stay enrolled in a pension scheme. A quarter said they would opt out, and 38% said they were unsure.

Jonathan Lima-Matthews, IPSE senior policy adviser, said: “With just 31% of the self-employed saving into a pension, we must take urgent action to avert a looming crisis.”

He described self-employment as a progressive way of working, but said current pension provisions did not cater to the sector’s needs.

“While auto-enrolment has been a successful policy for boosting the number of employees paying into a pension, our research found it’s simply not a viable savings solution for the self-employed,” he said. “There is no employer to enrol them, and it also reduces their ability to be flexible and in control of their money – two of the fundamental attractions of self-employment.”

The government proposed several measures to expand its auto-enrolment policy in December, including testing “targeted measures” for self-employed workers to improve saving levels.

IPSE’s report was based on research into the attitudes of more than 1,000 people, alongside “a broad consultation with the industry and government”.

The organisation also made specific recommendations, advocating for a “sidecar pension scheme” for the self-employed, which would allow them to save for later life and also into a separate ‘rainy day’ fund for emergencies. 

The forthcoming financial guidance body for the UK – to be set up later this year – should provide tailored advice on how the self-employed can save for later life, IPSE added.

The UK’s Department for Work and Pensions is due to test several options designed to improve pension saving for the self-employed.

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