A finance expert has expressed concern about side hustlers believing a workplace pension is enough. Side hustles are becoming increasingly popular, with an estimated 49 per cent of Brits having one, according to PensionBee. But, among these side hustlers, only 5 per cent save any of their earnings into a pension.
The Survey Findings
The survey revealed that almost half of Brits have side hustles, with a further 12 per cent having had one at some point in the last two years. For 81 per cent of those with a side hustle, the earnings are relatively modest, earning less than £500 a month from it. But, while only 5 per cent save earnings into a pension, PensionBee research shows that doing so throughout your working life could boost your retirement pot by up to £154,000.
Where Side Hustle Earnings Go
Most side hustles earnings are similarly going elsewhere. While 39 per cent go to everyday living costs, 31 per cent go to treating themselves. Elsewhere, 23 per cent of side hustle earnings go to building up savings and 19 per cent to help pay off debt. Putting these earnings into a pension was the least popular choice, with only 5 per cent doing so.
Reasons for Not Saving
When invited to explain the reasoning behind not contributing to their retirement savings, a quarter said they already have a pension through their main job and don't feel they need to contribute anything extra. However, PensionBee noted this could be a “costly misconception”. Reportedly only 9 per cent of working age Brits are set to have a comfortable retirement on current Auto-Enrolment minimums.
Twenty-two per cent said they cannot afford to put their side hustle earnings into a pension because all of the money goes towards essential expenses. Meanwhile, 20 per cent said their side hustle income is too unpredictable to commit to regular pension contributions.
The Potential Boost
Nevertheless, the experts explain that committing to pension contributions could grow personal pensions to over £154,000 by retirement, by saving the equivalent of the £1,000 annual tax-free trading allowance – an exemption which allows Brits to earn up to £1,000 of gross income per tax year from small side hustles, hobbies, or casual jobs completely tax-free. Their estimates suggest that if Brits save £1,000 a year from the age of 25, they could build up an additional £154,000 in pension savings by age 67, in today's money.
Expert Comment
Maike Currie, Vice President of Personal Finance at PensionBee, said: “For millions of people, a side hustle has become a lifeline against the rising cost of living, but the extra income is too often swallowed up by day-to-day spending or held in places that won't deliver the long-term growth a pension can. This is a missed opportunity for building much-needed retirement wealth.”
She argued that the most concerning finding is that a quarter of side hustlers believe that their workplace pension is enough. “The reality is that Auto-Enrolment minimums are not enough to fund a comfortable retirement while millions of 'invisible' workers - including carers and the self-employed - are excluded from the system altogether.”
She concluded: “PensionBee is calling for reform that reflects how people actually work today, including expanding Auto-Enrolment to cover lower earners and using Self-Assessment to nudge the self-employed to start saving. In the meantime, anyone with a side hustle should take control today by opening a personal pension and making the most of the valuable government top up in the form of tax relief available on contributions. Even modest amounts redirected each month can compound into substantial sums by the time you stop working.”
