Self-employed workers are at risk of falling short in retirement unless more is done to encourage pension uptake, the Pensions Policy Institute warns.
Under auto-enrolment, self-employed individuals are not compelled to take out a workplace pension policy, while the majority of the rest of the population will be automatically entered into a scheme.
A PPI report published today says: “The take up of private pension saving by self-employed people has declined over the last decade and in 2011 only 34 per cent of self-employed people were active members of a pension.
“Unless a significant proportion of self-employed people choose to join a pension scheme, pension saving may remain low among this group even after automatic enrolment.”
The report includes scenarios for the UK’s savings levels depending on auto-enrolment opt-out rates.
The think-tank’s estimates show a 9 per cent opt-out rate will see total pension savings in DC schemes rise to £495bn in 2030 – some £40bn higher than if 25 per cent of employees opt-out.
Its calculations also show employer contribution rates could have a dramatic effect on pension saving levels.
The PPI estimates that, by 2030, a trend towards minimum contribution rates from employers could see the volume of assets saved sit around £450bn, while if current provision levels are maintained, total assets could be closer to £505bn.
Although current opt-out rates are around 9 per cent, the report adds that there is “limited evidence” on how medium to smaller employers and their workers may respond once minimum employee contributions reach their full level of 4 per cent.
PPI senior policy researcher Daniela Silock: “The current opt-out rate of 9 – 10 per cent has exceeded expectations, however it is worth reflecting that larger employers, who are more likely to have existing provision and extensive HR and admin support structures around pension saving, have just completed their staging dates.
“Small to medium sized employers will be reaching their staging dates over the next few years, and it will be important that these employers are given the support necessary to fulfil their duties and that employees for whom pension saving might be beneficial are not encouraged to opt-out.”