• The average private pension wealth for people with multiple jobs nearing or in retirement (aged 55 to 69) who earn less than £10,000 in each role, is £12,400 – just 6.1% of the average man’s at £203,200*
• For those who are self-employed, private pension wealth is higher at £121,200, but still only 77% of the average man’s
• However, while 71% of multiple job holders now save into a private pension, only 15% of the self-employed do

New research commissioned by NOW: Pensions, the pension provider for 1.8 million people, has found that multiple job holders face huge barriers to saving, resulting in a private pension pot just 6.1% of the UK average.

This research by the Pensions Policy Institute (PPI) will be published in December and demonstrates that multiple job holders earn 39% less than the UK average population. This means average earnings of £16,750 in comparison to the UK average of £27,380 which impacts pension saving. Even when state pension and other benefits are taken in account multiple job holders still have 46% less than the baseline population’s pension income, just £210 a week compared to £390 a week.

These low levels of earnings mean many people with multiple jobs are excluded from Automatic Enrolment (AE). AE is only triggered once a worker earns over £10,000 a year in a single job. Even those that are earning more than the £10,000 threshold in a job and are enrolled still miss out on potentially significant contributions from each of their employments due to the Lower Earnings Limit.[1] The lower limit is set at £6,240 meaning that only earnings over that amount are pensionable. Instead of saving 8% into a pension, those earning £10,000 are only contributing 3.8% of that total figure.

The self-employed picture is just as gloomy

Five million people in the UK are self-employed, contributing an estimated £305 billion to the UK economy.[2] The majority of the self-employed are men. Among those who have been self-employed for two years, 65% are male, of those who have been self-employed for 20 years, 71% are male.

The report by PPI reveals that 85% of the self-employed do not save into a private pension and this figure has grown from 73% in 2008/09. The remaining 15% of the self-employed who do manage to save into a pension have 77% of the pension wealth of the average population.

This is partly because lower than average incomes and the need for financial liquidity can make it difficult to save consistently.  However, it is also down to attitudinal and other barriers as, even amongst the highest paid self-employed workers, pension participation rates are still at just 19%.

The self-employed group is excluded from accessing the benefits of AE because they do not have an employer who must automatically enrol them and provide contributions. The report identifies that after being self-employed for 20 years pension savings really begin to suffer with retirement incomes dropping to 53% of the UK average. This drops further for those who have been self-employed for longer.

The self-employed and multiple job holders are the groups most likely to sound alarm bells around low levels of pension participation and saving. This is going to be made worse by the continuing economic downturn resulting from the Covid-19 crisis.

Mike, 33 from Leeds, is married with one child and has another on the way: “Pre-COVID, I worked multiple jobs – a delivery driver for local businesses and a part-time job bar-tending. My wife does occasional cleaning work but as she goes further into her pregnancy this is becoming less of an option.

“Before COVID 19, as a family we had made enough money to live, but not save. I was more focussed on providing for the day-to-day, and whilst I occasionally thought about a rainy-day fund I not only didn’t think about pensions, but I wasn’t aware that they were something I had to concern myself with. I assumed that when I reached a certain age a state pension would be enough to see me through my old age.

“COVID has changed my work life and consequently my perspective on savings and pensions. My second job, bar tending, is no longer there to give me an income stream – meaning I have had search for more full-time driving jobs. It made me realise how precarious my finances were, and that I needed to start planning to ensure that I could provide for my family now and in the future.”

The report also found that neither the level of income nor the closer you are to retirement have a material impact on the likelihood of being member of a pension scheme if you are from either of these groups. Less than a quarter (23%) of self-employed 60-64-year olds are members of a pension scheme – which is defined as a scheme from a previous employer or a personal pension.

Multiple job holders and the self-employed both have lower incomes than traditional, full-time, employees

Average annual full-time earnings for the self-employed is £19,560, almost a third (29%) less than the baseline population (£27,380). However, this does increase the longer someone is self-employed.

The average total income for those who have multiple jobs that each pay less than £10,000 is £16,750 – 39% less than the baseline population. This has a significant impact on a person’s ability to save for the future.

Joanne Segars, Chair of Trustees at NOW: Pensions comments: “Auto enrolment has proved to be a huge success in getting vast numbers of working people in the UK saving for their later life, with just over 10 million now enrolled. However, there is an additional 5 million self-employed workers who are locked out of workplace savings and given no support, or incentive, to start saving for their retirement.

“NOW: Pensions is calling on the government to make significant policy changes to improve the later life outcomes for the self-employed and multiple job holders, especially as the Coronavirus pandemic is set to vastly increase the number of people working multiple part-time jobs. One key policy change would be to scrap the £10,000 AE trigger. If auto enrolment were to start from £1 of earnings and include cumulative income from multiple jobs this would allow 106,000 people to benefit and increase pension wealth by 175%.”

Andy Chamberlain, Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed), said: “This research is both very valuable and very concerning, chiming with our own past findings about the lack of pension saving among the self-employed. The reality is that the fluctuating incomes of the self-employed (particularly amid the financial turmoil of the pandemic) mean that rigid pension schemes such as the auto-enrolment programme simply do not work for them. 

“The self-employed need flexible pension plans that allow them to draw down on their savings when they need them. For both the self-employed and workers holding multiple part-time jobs – and anyone else whose style of work is not suited to rigid pension plans – it’s important that more flexible, accessible savings options are made available.”

The report, published in December, will look at six under-pensioned groups and the reasons for not being able to save sufficiently for later in life.