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By Stephanie Baxter Deputy personal finance editor

Saving into a workplace or personal pension fund is the best way to build up a big enough pot of money to last your retirement. With tax relief on pension contributions, it should be a no-brainer.

But pensions seem to have an image problem among the self-employed. The number of people working for themselves who invest in personal pensions has dropped by almost a third over the past four years to 410,000, according to HM Revenue & Customs.

These are worrying figures if we consider the boom in self-employment. In 2001, 3.3 million people were counted as working for themselves; it shot up to nearly five million last year.

The problem is there is no obligation to provide the self-employed with pensions. They can use personal pensions to save for retirement but this is their own active decision.

This is a far cry from rules in the workplace, where all companies must provide their employees with pensions, putting in 3pc of salary out of their own pocket while staff have to pay 5pc. Employees are automatically enrolled into these pensions, whereas the self-employed are not.

The Government has looked at how to avoid a self-employed pensions crisis but has failed to come up with a solution so far. It must urgently address this savings gap – particularly as the number of self-employed people continues to rise.

The state pension will increase by 4pc next April – but even the new gold-plated payout of 175.35 per week will not be enough to financially support people in retirement. Until the Government comes up with a proper solution for self-employed people, these entrepreneurs and business owners must take matters into their own hands and make sure they have enough put aside to fund their later life.

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