Official data unmasks divided nation when it comes to pensions

Tom Selby
17 June 2022
  • Automatic enrolment has driven a pensions revolution among those who qualify, with the proportion of people saving for retirement rising from 43% to 57% (Saving for retirement in Great Britain - Office for National Statistics (
  • But the UK is divided when it comes to pensions with the self-employed, low-earners, people with illnesses and ethnic minority groups all having lower pension wealth on average
  • The wealthiest 10% hold almost two-thirds of all private pension assets while the bottom 50% hold less than 1%
  • Having a low income was the most common reason for not saving in a pension (54%)
  • Self-employed workers more likely to say they could not afford to save in a pension (39% compared to 26% of employees) or preferred alternative forms of saving (17% versus 9% of employees)
  • Almost a third of people didn’t expect to have retirement savings beyond the state pension

Tom Selby, head of retirement policy at AJ Bell, comments:

“Automatic enrolment has succeeded in getting millions of workers saving something for retirement but make no mistake about it, the UK is very much a divided nation when it comes to pension savings.

“This undoubtedly in part reflects wider inequalities in society, with those on the highest incomes more able to build up big pension pots versus those on lower incomes.

“However, there are also significant structural challenges and gaps in automatic enrolment that need to be addressed.

“For example, millions of self-employed workers are not covered by auto-enrolment and, without urgent action, risk ending up relying almost entirely on the state pension in their later years.

“In fact, the average pension wealth of a self-employed worker approaching state pension age was just £16,100 versus £91,400 for employees. If this problem is left unaddressed then a huge section of society will be living in penury in retirement.”

Self-employed - radical solutions need to be considered to avert disaster

“While the problem facing the self-employed is clear, solutions are less obvious. The Lifetime ISA has the potential to be an ideal retirement saving vehicle for the self-employed but is held back by the 25% early withdrawal charge and the 18-39 age restrictions.

“Reducing the withdrawal charge to 20% - so it just aims to return the upfront Government bonus – and scrapping the age restrictions would make the product more attractive for the self-employed.

“Another idea that has been floated could involve using the National Insurance (NI) system to allow people to divert money into a Lifetime ISA or a pension. The Government could increase NI rates for the self-employed, for example, but give them the option of diverting this increase into a savings vehicle.

“This would be a hard shove into pension saving, rather than a nudge, and would certainly be controversial. However, radical solutions need to be considered if a future disaster is to be averted.

“The self-employed are just one example of a pension problem requiring action – there are many more. Other groups, such as those with multiple low-income jobs, also risk missing out in retirement. Similarly, there will be people in their 40s and 50s who have missed out on the glory years of defined benefit pensions and don’t have enough time to build up a decent-sized defined contribution pot via auto-enrolment.

“Addressing these challenges will require big, bold, coordinated thinking from Government - and potentially warrants another Pension Commission.”



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Tom Selby
Head of Retirement Policy

Tom Selby is a multi-award-winning former financial journalist, specialising in pensions and retirement issues. He spent almost six years at a leading adviser trade magazine, initially as Pensions Reporter before becoming Head of News in 2014. Tom joined AJ Bell as Senior Analyst in April 2016. He has a degree in Economics from Newcastle University.

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