The increasing number of self-employed people is causing a real headache for pensions

The recent trend towards self-employment could potentially create problems for pensions, a report out today warns.

According to the research by the Federation of Small Businesses (FSB), self-employment is now at its highest level for 40 years but less than a third (31 per cent) of those who are self-employed are saving into a private pension.

Meanwhile, 15 per cent have no retirement savings at all.

Unlike those who are employed, those who are their own boss have not been brought into the pensions saving regime through auto-enrolment.

In light of its findings, the FSB is calling on ministers to work on developing a savings system that would be more beneficial to the self-employed.

"It has never been easier to go it alone, yet policymakers have been slow to respond to the boom in self-employment and are therefore playing catch up," said Sue Terpilowski, FSB London policy chair. "It is crucial that policy makers act now to adapt to this changing workforce otherwise we will only be storing up problems for the future."

A report released by Royal London last week reached similar conclusions about the state of pensions among the self-employed. This report suggested that one way to overcome the lack of retirement provision for those working for themselves would be the raise the rate self-employed people pay National Insurance Contributions at and divert the amount of the increase to either a pension or a lifetime Isa.

"Self-employed people are missing out on the surge in pension scheme coverage among employed earners," said Steve Webb, director of policy at Royal London, at the time the report was launched. "Indeed, whilst the number of self-employed people is growing, their membership of pension schemes has collapsed and is now at crisis levels. It is time for action."

The FSB report also highlighted that, while self-employed people feel that their career choice has brought them freedom, independence and a better work-life balance, many are also concerned about the uncertainty that comes from not having a fixed income and are worried about not having a safety net should they fall ill or need to take time away from their business.

"For many, the self-employed feel like round pegs trying to fit into a system built of square holes," Terpilowski remarked. "Many are being shut out of financial services like mortgages or personal insurance because they don’t fit the usual mould. They are also unable to access many of the support frameworks in place for people in the workplace."