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Self-employment jeopardises state pension

14th May 2018

The growth of self-employment is putting pressure on the sustainability of the state pension, research has found.

According to analysis from Aegon, £2.8 billion is lost in national insurance (NI) receipts for every 1 million people who move from employment to self-employment.

The challenge has arisen since reforms to the state pension were introduced in 2016, giving self-employed people the same state pension entitlement as employees.

Because their NI contributions were not increased at the same time, analysis shows this could lead to a shortfall in the receipts that are used to fund the state pension.

Self-employment has become an increasingly popular option, having grown by 1.5 million people in the last 16 years.

Steven Cameron, pensions director at Aegon, said that increasing NI contributions for all self-employed people is not the answer to this challenge.

Cameron added:

"Compared to their employed peers, the self-employed are not benefitting from automatic enrolment into a workplace pension with an employer contribution, and miss out on other benefits like maternity and paternity pay.

"The government needs to balance these considerations when looking at how to find a fair way of maintaining the state pension system."

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