New Demos polling finds self-employed workers seriously concerned over later-life savings, with pensions presenting their biggest challenge

  • A new report from Demos think tank finds economic insecurity in later-life is the most pressing challenge for Britain’s burgeoning self-employed workforce.
  • New polling reveals nearly 1 in 2 self-employed workers are “seriously concerned” about their lack of savings for retirement (46%), whilst 38 per cent are “seriously concerned” with current pension provision for the self-employed.
  • Demos argues that a “corporatist bias” towards traditional employment has hindered policy development for the self-employed and calls for a “new deal” with major reforms in pensions, welfare and tax the top priorities.
  • Demos calls on the Government to introduce and pay for a new auto-enrolment pension scheme for the self-employed, matching the April 2019 level of contributions firms must make for their employees. The Government would become the ‘de facto’ employer in this new scheme for self-employed workers.
  • Demos recommends the introduction of a new ‘engagers tax’ of 2.5% levied on a firm’s total expenditure on contracted self-employed labour, rising to 5% in 2021 and 7.5% by the end of the Parliament. This would help fund the “new deal” including the new self-employed auto-enrolment scheme.

The steady rise of self-employment has been one of the most significant labour market trends of the past two decades, with 4.77m self-employedworkers now comprising nearly 15 per cent of the British workforce. However, policymakers still hold a “corporatist bias” towards traditionalemployment, meaning our policy systems – including tax, welfare, training and employment law – have not caught up with this extraordinary rise. This has left Britain’s self-employed workers in desperate need of a “new deal”.

This need is most pressing in pensions and later-life savings. Only 17% of self-employed workers – and just 13 per cent of self-employed women – participate in a pensions scheme, compared to over 50 per cent for employees. [i] New polling from Demos underlines how this situation is causing significant anxiety amongst self-employed workers. Nearly 1 in 2 self-employed workers are “seriously concerned” about their lack of savings for retirement (46%), whilst 38 per cent are “seriously concerned” with current pension provision for the self-employed.

These findings form part of a major new research project, Free Radicals, which has been supported by IPSE, and explores what the most pressing concerns and aspirations of Britain’s self-employed workers are today. Drawing on original new polling of 1000 self-employed workers across the UK and focus groups Demos conducted with self-employed workers in Leeds and London, the new research finds that:

  • Despite difficulties posed by greater economic insecurity, self-employment is extremely popular with 80% stating they are happy with this form of employment.
  • 70% of self-employed workers intend to stay in self-employed for the foreseeable future, with only 2% of workers stating they would consider switching to employee status as soon as possible.
  • “Being in control of my own work” is the most popular reason why people choose to become self-employed, with 60% of participants ranking it in their top five reasons for being self-employed. 57% referenced enjoying “greater control over my hours”, with 56% including “freedom to choose where they work”.
  • A lack of statutory employment rights is also a pressing issue for self-employed workers – with 49% “seriously concerned” over the financial implications of not being able to work due to illness or injury.

Personal reflections from focus group participants in this research:

“Yeah I’m happy. I have experienced both and the pressures in employment were immense and I was lying awake at night stressing about it. I’m happier just being my own boss”. Female participant, Leeds

“I would rather pay [more tax] for pensions. At the end of the day, when I’m retired, I’d rather struggle now and give them that extra cash to be guaranteed to have some money”. Female participant, Leeds

“There’s so many different types of pensions though, this is why I get stuck every time I look at it. It [auto-enrolment] is appealing though. I’d rather put my money in before I pay the tax on it, instead of paying the tax on it. It would make sense”. Male participant, Leeds

“I worry if I survive like this what happens when I’m older, when there’s nothing in my account – that’s when I panic. I mean, I can sometimes afford to contribute to a private pension, but work is so intermittent.” Female participant, London

Policy Recommendations

Based on our research, Demos argues there is now an urgent need for a ‘new deal’ for the self-employed workforce. The report proposes thirty policy recommendations across six areas – savings, tax, training, working conditions, the platform economy and welfare. These include:

  • The introduction of an auto-enrolment pension scheme for solo self-employers, with the Government funding contributions that match the employer level of contributions from April 2019.
  • A new ‘engagers’ tax to help fund an auto-enrolment scheme. This would initially be levied at 2.5 per cent on a given firm’s annual expenditure on contracted self-employed labour, rising to 5 per cent in 2021 and 7.5 per cent by the end of the Parliament.
  • A comprehensive reform of Universal Credit criteria for the self-employed, with the Minimum Income Floor exemption extended from one year to three years dependent on an annual ‘gainful employment’ interview within that period.
  • Maternity allowance boosted so that it falls into line with statutory maternity pay and the introduction of Paternity Allowance that is equal in worth to statutory paternity pay.
  • A statutory definition of self-employment to help crackdown on ‘false self-employment’ and exploitation.
  • new licensing regime for platform economy providers (e.g. Uber) in order to provide more accountability and extra powers for enforcing the national minimum wage.

Commenting on the report’s findings, the author Alan Lockey head of Demos’ Modern Economy Programme said:

The rise of self-employment is one of the biggest changes to the modern economy in the last couple of decades and our research shows it is an enjoyable experience for most people. We need to think pragmatically about whether we should actively encourage it – it could be that it is the British solution for a more flexible, less rigid approach to life and work in the future, as it already is for millions of people. That means we need a new deal to boost security for the self-employed and by far the most urgent problem is dealing with a looming pensions and savings crisis.

IPSE CEO, Chris Bryce, said:

“We commissioned this landmark report with Demos to reveal the realities of self-employment, open up much-needed discussion about it, and find ways to promote and support this vital and burgeoning sector. By truly understanding the sector and opening an honest discussion about it, we intend to build towards a radical new deal for self-employed people the length and breadth of the UK.”

Media Contact

Caitlin Lambert – Communications Officer, Demos

Phone:  020 7367 4200 | 07826520552 (out of hours)

NOTES TO EDITORS

About Demos

Demos is Britain’s leading cross-party think-tank: an independent, educational charity, which produces original and innovative research.

About IPSE

IPSE, the Association of Independent Professionals and the Self Employed, is the voice of the UK’s self-employed population who make up one in seven people working today. IPSE makes sure freelancers, interim managers, consultants and contractors are represented to Government.

[i] Adam Timson, Who are the Self-Employed (London, New Policy Institute for the Citizens Advice Bureau, 2015).