Self-employed people would rather invest cash into savings accounts, cash ISAs or property than pay into a private pension, according to research by Citizens Advice.
The Shy of retiring: addressing under-saving among self-employed people report found half of the self-employed people surveyed did not trust private pensions as a safe place to invest their money. They also lacked understanding and information with over a quarter (27%) saying they had never received any information or advice about pensions.
The report's findings are based on a survey of 650 self-employed people as well as focus groups.
Although just 17% of self-employed people currently save into a pension, the report indicated this could almost double if the government topped up their contributions. It recommended that contributions be matched by the government up to a level of 1% of gross income. More than 4 in 10 of people not saving into a pension said this would encourage them to contribute to a pension.
Over two thirds (67%) did not understand the tax breaks provided by cash ISAs and private pensions with a quarter (25%) wrongly thinking that an ISA offers better tax breaks than a pension.
Another significant barrier to pension take-up among the self-employed was the belief it is an administrative burden.
Citizens Advice argued that in order to increase their trust and understanding of pensions, they need to be aware of the pros and cons of this savings vehicle.
It urged the government, pension providers and advice bodies to increase information and advice to about pension options so individuals can make informed decisions about how best to save for retirement.
The report also suggests that increasing appetite for pensions among self-employed people should be accompanied by incentives and action to make it easier for them to set up and save into a pension.
Citizens Advice chief executive Gillian Guy said: "People who work for themselves are missing out on the financial security offered by a pension.
"It is really important that self-employed people are offered up front information about how pensions can work for them so they can make an informed choice as to the best retirement savings plan. Paying into a pension also needs to be made easier and come with similar incentives for self-employed people as those currently enjoyed by employees."
Citizens Advice recommendations:
- Create an opt-in pensions system on self-assessment returns
- Self-employed pension contributions should be matched by the government up to a level of 1% of gross income
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