By Lisa Picardo, Chief Business Officer UK at PensionBee
When the Pensions Commission was relaunched last summer, it was an admission that the UK is facing a retirement crisis, and acknowledgement that our retirement system simply cannot stand still. The original Commission of 2006 was a success, building consensus for the roll-out of Automatic Enrolment into pension saving, with more than 20 million employees[1] currently saving into workplace pensions each month.
But two decades later, any serious examination of adequacy and sustainability has to confront a growing structural retirement gap borne from the rise of the invisible workforce. The Commission’s interim report has now confirmed what many of us working in this space have long argued: the self-employed are being left behind, and the system was never designed to catch them.
Automatic Enrolment works as a safety net because it’s built on payroll deduction and employer contributions. It assumes regular pay, predictable hours and a sponsoring employer. For employees it works well, regardless of levels of financial literacy or engagement – in fact inertia often works in their favour.
However, for the self-employed and other non-traditional workers inertia, meaning inaction, means missing out. The interim report found that just one in 25 wholly self-employed workers is actively saving for retirement. The fact that pension saving among business owners has fallen since the 1990s is indicative of a policy failure.
For the self-employed, there’s willingness, but knowledge gaps remain
Recent research[2] of a representative group of 1,000 self-employed people without a pension shows how deep the barriers run. Nearly three-quarters (74%) were unaware that self-employed pension contributions benefit from tax relief. More than a third (34%) didn’t know when they would feel comfortable starting contributions at all. Yet 61% said they would be willing to reduce or stop at least one existing saving habit to begin pension saving. This tells us that whilst there are gaps in knowledge, there’s willingness to save for retirement.
Irregular income is central to the difficulty faced, with 38% citing income volatility as the biggest barrier to retirement saving. While 31% said monthly contributions appealed to them, only 8% preferred quarterly contributions, pointing to a need for flexibility rather than simply different payment intervals. Almost a third (31%) wanted personalised guidance on what would be safe to contribute, reflecting the absence of employer nudges that employees receive as a matter of course.
Gig workers and unpaid carers face huge challenges and often fall through the cracks
Platform-based gig workers exist in a similar grey zone. They’re contracted into consultancy, design, freelance or perhaps food delivery work, but are not captured by Automatic Enrolment, so they fall through the cracks. The absence of a default savings mechanism and a lack of prompting or education around the need for retirement savings means pension provision becomes an entirely individual responsibility, competing with other day-to-day demands.
Unpaid carers face a different challenge, as prolonged time out of the workforce interrupts pension accumulation. Although National Insurance credits can protect state pension entitlement, private pension saving frequently stalls. Given that caregiving falls disproportionately on women, this feeds directly into persistent gender pension gaps.
The retirement savings gap is stark
| Employed, with minimum employer contributions(2) | Self-employed from 35, no employer contributions, 5% own contributions(3) | |
| Eventual retirement pot(1) | £449,718 | £362,793 |
Notes:
- Analysis assumes a starting salary of £30,000 at age 21, 1% annual salary growth, 5% investment growth, 0.7% management fees, and a retirement age of 68.
- Assumes total contributions of 8% of earnings, including employee contributions of 5% and minimum employer contributions of 3%.
- Assumes contributions of 5% of earnings.
Take an illustrative example of someone earning £30,000 at age 21 – if they remain employed making contributions and benefitting from employer contributions (assumed to be a total of 8% of annual earnings), they will retire with £449,718 of savings at age 68. If the same person were instead to become self-employed from age 35, contributing 5% themselves but losing employer support, they would retire with £362,793 at the same age. That’s nearly £87,000 less.
The solution already exists – it just isn’t being used enough
It’s worth being clear that invisible workers are not without options. Personal pensions already offer much of the flexibility this group needs, and they are more accessible than many realise.
Unlike workplace schemes, a personal pension is not tied to an employer. It travels with you as your working life changes, through career breaks, shifts between employment and self-employment, and changes in income. Contributions can be made at any time and in any amount, and importantly they attract government tax relief, regardless of the nature of work or employment status. For those with pension pots from previous employed roles, a personal pension also provides a natural home for consolidation, making it easier to track savings and take control of retirement planning.
The barrier for invisible workers, then, is not the absence of a suitable product. It is awareness and education from the start. When almost three-quarters (74%) of self-employed[3] non-savers don’t know their contributions attract tax relief, the conversation about personal pensions and the importance of proactive saving for retirement simply hasn’t reached them.
The Commission needs to act on what it has found
The publishing of the Commission’s interim report is an important moment. It has diagnosed the problem with clarity and placed it at the centre of the policy debate. But diagnosis is not the same as action, and the invisible workforce cannot afford another round of acknowledgement without reform.
The Commission has rightly flagged the inadequacy of minimum contribution rates and the exclusion of lower earners and younger workers from auto-enrolment as critical issues. Whilst these are welcome recognitions, what the final report must now do is translate them into concrete, enforceable recommendations – moving beyond principles and aspirations, to specific changes with timelines attached and clear accountability.
For the millions who will never be reached by auto-enrolment in its current form, meaningful pension access already exists. A personal pension requires no employer, no fixed contribution and no minimum amount. It travels with you through every change in your working life, attracts government tax relief from the first penny contributed, and allows you to save what you can when you can. The Commission’s task is not to invent a new solution for the self-employed. It is to ensure that the solution that already exists is visible, accessible and actively promoted to the people who need it most.
Looking to the future: three reforms that would make the biggest difference
Expand Automatic Enrolment to reach more workers – Lowering the age threshold from 22 to 18 would help young workers benefit from compound growth earlier. Removing the £10,000 minimum earnings threshold would end the exclusion of many low earners from workplace saving. The Commission has identified both as priorities in its interim report, but the onus is now on them to convert that identification into action.
Create a clearer route into pension saving for the self employed – Personal pensions already offer flexibility, but many lack the prompt to get started. Using the Self Assessment tax return as a trigger point would introduce a clear moment to engage, with embedded guidance on contributions and tax relief. Automatic Enrolment works because it removes the effort of opening a pension – you are in unless you choose not to be. The self-employed deserve the same ease of entry.
Fix pension transfers – Invisible workers have often accumulated pension pots across multiple employers and working arrangements.The UK’s statutory deadline for pension transfers has not been updated since the 1990s, meaning poor performing transfers often go unchallenged. A 30 working day limit for straightforward transfers would improve accountability and give savers greater certainty.
The pension system must reflect the reality of the modern workforce
The Pensions Commission’s interim report has made the invisible workforce visible in the policy debate. None of these reforms are simple, but the cost of inaction may be greater.
The cost of inaction is not abstract. Our research shows that once saving patterns solidify, they are difficult to change and that crucially, younger workers demonstrate openness to adjusting their contributions to change the direction of their saving journey.
The invisible workforce isn’t marginal. It’s integral to the modern economy and society, already significant and growing rapidly. A pension system that fails to truly see this group of people risks the millions that are excluded today sleepwalking into later life poverty – not by choice, but by design.
[1] Based on data from The Pensions Commission, August 2025
[2] The self-employed without pensions are unaware of tax relief perk – despite openness to saving
[3] The self-employed without pensions are unaware of tax relief perk – despite openness to saving