Level playing field
The self-employed are at risk of being left behind in planning for retirement.
The UK labour market is one of the most diverse in the world with self-employment accounting for over a quarter of the rise in working numbers since 2010. According to Office for National Statistics figures, one in seven people in work choose to work for themselves, making a total of 4.5 million people.1
However, those choosing to ‘go it alone’ often have tough decisions to make about juggling self-employment with having a family, buying a home, or providing for their financial future, especially in the early stages of setting up their business.
A recent survey from IPSE, the Association of Independent Professionals and the Self Employed, has shown well over a third of freelancers are unable to contribute towards a pension fund and that one in ten are unsure of how to save for retirement.2
Whereas most employed individuals are automatically enrolled into a workplace pension, no such scheme exists for the self-employed. Yet, as the IPSE survey shows, this significant minority are in need of most help and deserve the same policy consideration as employees.
Number of self-employed in the UK, 1995-2015
Ian Price, divisional director at St. James’s Place Wealth Management says that fluctuations in income mean pension provision can sometimes get pushed to one side. “It’s hard to put anything into a pension if you’re not sure what your income is from one month to the next. So the self-employed are often reluctant to lock money away for longer periods.”
A culture of entrepreneurship is something the government is keen to foster, and in recognition that self-employed people are sometimes unfairly penalised, it has commissioned a review to look into the issues surrounding how they save for their retirement. Results are expected to be published in early 2016.
Price suggests that the government could offer self-employed people a pension vehicle similar to that provided under automatic enrolment but which is specific to their needs, adding that “we need a more flexible and supportive route into pension saving for the self-employed, where the lessons learned from automatic enrolment are applied”.
Regardless of any future policy, Price urges anyone not already saving into a pension to seriously look at doing something about it. He adds: “Pensions benefit from initial tax relief, and contributions can also bring people under certain tax thresholds. They’re not as inflexible as they used to be, so if anyone had concerns about lack of access to their own money, it’s no longer an issue. It’s just a case of getting some simple advice first.”
1 Office for National Statistics, ‘Labour Market Statistics’ for February to April 2015, published 17 June 2015
2 www.ipse.co.uk, 1 September 2015
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.