Self-employed saving more into pensions this year – despite tough year of reduced income

Martin Lewis outlines details on the fifth SEISS grant

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Pension saving for the first half of 2021 is up significantly for the self-employed at £690 compared to £543 during the same period in 2020 on average.

A similar and more marked increase in pension saving has been recorded among employees, whose contributions have risen from £374 in the first half of 2020 to £508 in the same period for 2021.

This works out to an increase in pension contributions of a striking 36 percent for employed workers and 27 percent for the self-employed.

This is despite the pandemic having taken the greatest toll on the self-employed.

On top of there being less Government support for them to access, 46 percent of self-employed workers reported having trouble affording basic living costs in January 2021, according to a study by the Centre for Economic Performance.

Furthermore, 37 percent of self-employed workers worked 10 hours or fewer a week during the same month.

Romi Savova, CEO of PensionBee, said: “It’s encouraging to see both employed and self-employed savers prioritising their pensions by increasing their monthly contributions, particularly during recent lockdowns.

“As always, we would encourage those who have a larger disposable income to continue saving where possible, and for those in retirement to keep as much of their pension invested until the exact moment they need it to ensure they’re well-positioned to enjoy a happy retirement.”

However, a disparity emerges when it comes to how much each category of worker has withdrawn from their pension over the course of the pandemic.

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Self-employed workers over the National Minimum Pension Age (NMPA) of 55 have started taking more cash out of their pensions, with the employed doing the reverse in the first six months of 2021 compared to 2020.

Self-employed pension holders have increased withdrawals by nearly half (47 percent) – from £9,309 to £13,722.

Employed pension holders have taken out fewer funds as withdrawals have fallen by eight percent from £10,602 to £9,765.

 PensionBee highlighted the same trend back in April 2020.

This means that the self-employed have increased withdrawals by 47 percent.

Meanwhile, employed workers have been able to reduce withdrawals by eight percent.

The trend observed here, that when people have been able to save more and withdraw less, they have done has also been observed earlier in the pandemic.

Without having employee benefits as a support mechanism, the self-employed have had to turn to their pensions to secure the cash they need to fund day-to-day living expenses.

They have also lacked the kind of Government support workers have relied on.

Naturally, without sick pay or the furlough scheme available to them, self-employed workers have struggled significantly.

PensionBee’s findings were based on analysis of 39,455 contributions in the first half of 2020 and 78,549 contributions in 2021.

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