Are you putting enough money away to build a pension pot that will support you from the age you plan to retire? Up to 4.8 million self-employed workers aren’t, according to a new report.
The report from free financial planning app Multiply surveyed 1,000 self-employed workers aged 25 to 40. It indicates that this group will overshoot their planned retirement age by a decade or more if they keep saving at their current rate.
With half of the freelancers surveyed admitting they don’t have a pension pot at all, they’ll be missing their planned retirement age of 64 by quite a long way unless they have another source of funding for later life.
According to Multiply, 15 per cent of the UK workforce are self-employed, which equates to 4.8 million freelancers. This is a record, and it’s the obvious attractions of being your own boss and being able to work flexibly that have encouraged people to take the leap.
Multiply has revealed that the self-employed say they need £35,628 a year to live on during later life, yet the figures show they’re not saving enough to be able to enjoy this level of retirement income.
The average pension pot among this group is £43,582, but nearly half (47 per cent) of the freelancers interviewed admitted to not having even started paying into a pension, and over half don’t currently make any payments into their pension pot.
When you compare the state of the average Brit’s pension, the numbers are less of a cause for concern. The average person expects they’ll need £32,270 a year for their retirement, and the average pension pot is £50,000.
The Department for Work and Pensions says the rate of opt-in for pension auto-enrolment for employed workers stands at 91 per cent, which means the vast majority are saving for retirement every month.
But according to the survey, the self-employed seem to be less concerned about the shortfall in their pension funds – with only 50 per cent not confident they’re putting away enough for later life.
This is in dramatic contrast to the 80 per cent of the general population who are worried they’re not saving enough.
If your money doesn’t flow in on a monthly basis, or in regular amounts (like it does for those on the company payroll), it’s easy to see how you could place this type of financial planning on the back burner.
Four in five of the 1,000 freelancers surveyed agreed it’s more difficult to put money away into a pension if you’re self-employed, and a few reasons are highlighted in the Multiply report.
Most of those surveyed believe the unpredictability around when you get paid is an issue, and 28 per cent say they find it hard to know where to get the right financial advice.
Among the issues preventing them from getting the information they need, they cited:
The majority (68 per cent) of those interviewed believe the government isn’t doing enough to help self-employed people plan for their retirement.
But the Department for Work and Pensions is looking into ways to increase pension participation among self-employed people, and is due to publish a paper explaining what the government plans to do.
It includes getting self-employed people take part in pension auto-enrolment, and 44 per cent of those surveyed said they’d be in favour of auto-enrolment. But on the flip side, 30 per cent of people admit that they don’t know how auto-enrolment works.
Do you think there’s enough clear information on pension auto-enrolment? Let us know in the comments.
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