Self-employed contribute 30% less to their pensions in lockdown, while overall contribution amounts rise

Rachael Oku

by , Head of Brand and Communications

10 June 2020 /  

10
June 2020

yellow spiral staircase with a black railing.

London, Wednesday 10 June 2020: New data released by PensionBee shows lockdown has had a significant impact on self-employed savers’ contribution rates in April 2020, with tax year-end contribution sizes decreasing by 30%, and the overall number of contributions down 11% year on year.

PensionBee, the UK’s leading online pension provider, has found that self-employed consumers are changing their financial habits during lockdown, contributing considerably less to their pensions this April than in the previous year.

It found that the average monthly pension contribution made by self-employed savers fell by 30%, from £3,427 in April 2019 to £2,383 in April 2020, with the proportion of self-employed savers contributing decreasing from 42% to 38% in the same period.

The findings follow data released by the Office for National Statistics (ONS) in May, which showed that as a result of the coronavirus pandemic, the self-employed were more likely than employees to have had their household finances and their jobs negatively impacted. 60% of those surveyed reported reduced income, and 23% said they had to use savings to cover their living costs between 3 April and 30 April 2020 (1).

While the self-employed are being provided with financial assistance via the UK government’s self-employment income support scheme (SEISS), which has been extended to October, data from the ONS suggests that a significant portion of the more than 5 million self-employed people in the UK are not qualifying for support (2).

As of June 2020, 17% of PensionBee’s customer base identified as self-employed, down slightly from 20% in 2019. PensionBee’s latest findings follow data it released last month which highlighted that the average monthly pension contribution among its customer base had increased by 43%, from £1,225 in April 2019 to £1,752 in April 2020, while the overall proportion of savers making pension contributions slightly fell from 19% to 17% in the same period.

Romi Savova, Chief Executive of PensionBee, commented: “It is evident that self-employed consumers are among the hardest hit by the financial repercussions of Covid-19, and the inequity in the speed of government support. Ordinarily the end of the tax year is a time that the self-employed typically make higher than usual contributions to their pensions, and the fact we have not seen this is of concern. We would encourage our self-employed customers to be prudent with their finances and only save what they are confident they can spare. They should remember that they can save flexibly throughout the year with PensionBee, receiving tax relief on their personal contributions and being able to make employer contributions directly from their business if they are the director of a limited company.”

  1. ONS
  2. ONS

Appendix

Case study

Allison Gruner, Self-employed PensionBee customer, age 35

To accompany the data PensionBee is happy to share a case study of a saver who was unable to contribute to her pension in April 2020, but did make a contribution in April 2019.

“Neither my husband nor I are not working at the moment due to COVID-19 and being PAYE Freelancers (Television Industry), we don’t qualify for the government furlough schemes so are living primarily on savings at the moment. Since money is tight and we don’t currently don’t have an employer to contribute, we probably won’t be making any pension contributions for a while. It does worry me a bit but we both have contracts due to start once we’re allowed to work again so hopefully will be back on track soon!”

Table 1: Average self-employed contributions

April 2019 April 2020 Decrease (%)
£3,427 £2,383 30%

Source: PensionBee, May 2020. Based on 2,894 contributions in 2019 and 4,749 contributions in 2020.

Table 2: Proportion of contributing self-employed customers

April 2019 April 2020 Decrease (%)
42% 38% 11%

Source: PensionBee, May 2020. Based on 1,460 contributors out of 3,444 eligible customers in 2019 and 2,495 contributors out of 6,610 eligible customers in 2020.

Table 3: Average overall monthly pension contributions

March - April 2019 March - April 2019 Increase (%)
£1,225 £1,752 43%

Source: PensionBee, April 2020. Based on 8,639 contributions in 2019 and 14,540 contributions in 2020.

Table 4: Overall rate of contributions

March - April 2019 March - April 2019 Difference (%)
19% 17% 2%

Source: PensionBee, April 2020. Based on 8,639 contributions in 2019 and 14,540 contributions in 2020.

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