A new report by Multiply found some worrying statistics for self-employed people surrounding their pensions and the age in which they’ll be able to retire.
Whilst being your own boss is more popular than ever before, with 15% (4.8 million) of the UK workforce self-employed, there has been a significant decrease in this group actively paying into personal pensions.
How much do you need in retirement?
According to Multiply, self-employed workers say they need £35,628 a year to live on when they retire, but nearly half of those surveyed hadn’t started saving, so they are not saving enough to reach their desired annual income.
Those figures are much safer for those in employment paying into a pension scheme. This group expects to need £32,270 per year and the average pension pot is around £50,000.
What’s the trouble?The Multiply report, surveying 1,000 self-employed people, found that around 50% of self-employed workers felt concerned about not putting enough away. In contrast, a staggering 80% of employed people feel worried about not saving enough. Self-employed workers are less worried about saving and so are more reluctant to join a scheme.
It’s harder for the self-employed
It’s no surprise that 4 in 5 self-employed workers feel it’s harder to save in their situation. Irregular payments, lump sums, a lack of product and no employer contributions could all hinder a self-employed person’s choice to join a scheme. 28% of people surveyed found it hard to know where to get the right financial help whilst the majority felt not knowing when they get paid was the biggest issue.
Can the government help?
Remarkably, 68% of those surveyed felt that there was not enough help from the government to plan for their retirement. An auto-enrolment plan is high on the list of needs, with 44% happy to join such a scheme. The Department for Work and Pensions plan on assisting with this scheme, though there is evidently little explanation or access to answers for self-employed workers, with 30% admitting to not understand what an auto-enrolment plan is.
What can you do?
Whilst there are more options for employed people paying into a workplace pension, self-employed workers can benefit from clear and effective planning, and it all starts with an awareness of how important pension savings are. The sooner you start paying in, the better.
Whilst it can be difficult paying in a regular amount regularly, make a plan and try to stick to it. If you miss a payment, see if you can pay more in your next payment to ensure you’re on track. Having an overall goal can help, even if your retirement is decades away. Consider how much you’ll need per year in retirement and work to this. It’s worth setting annual reviews of your pension so that you can check your plans match how much you actually paid in.
EIC Insurance Services understand the concerns self-employed people have and can take one less stress away from you with a quality insurance policy built around you, whether you need professional indemnity, cover for your van or work vehicle, or something else.
Give us a call on 01442 286910 or drop us an email to find out more.