UK’s self-employed face working until 79
The financial planning app’s research found that half of self-employed people don’t have a pension and only 28 per cent feel confident they’re saving enough each month. The average ideal retirement age for these workers is 64, four years before they can claim state pension.
Of the 1,000 25 to 40-year-old freelancers polled, 80 per cent said it was more difficult for freelancers to plan for retirement than full-time employees. The majority (86 per cent) said this is due to unpredictable income patterns, whilst 28 per cent said it’s harder to find suitable financial advice for self-employed people.
According to the Office for National Statistics, 4.8 million people in the UK are self-employed, accounting for almost 15 per cent of the workforce. Young people are driving this surge, with many attracted by the opportunity to become their own boss and work flexibly.
The Multiply report shows that at their current rate of saving, young self-employed workers (aged 25 to 40) will fail to save enough to meet their desired retirement pot and overshoot the age they wish to retire by more than a decade.
Freelancers say they need an annual income of £35,628 to support them in later life, but the data suggest they are not doing enough to achieve this. Their average existing pension pot is just £43,582, and nearly half (47 per cent) of those interviewed admitted they’ve not even begun building a pot. The average monthly gross contribution into a pension pot is £348 for those who do save, but more than half (53 per cent) do not currently make any contributions at all.
In comparison, the average Brit aspires to an annual income of £32,270 in retirement and already has an existing pension pot of £50,000. Almost all full-time employees are now contributing to workplace pensions each month – the Department for Work and Pensions says the current rate of opt-ins for auto-enrolment pensions is 91 per cent.
Another cause for concern is freelancers’ relative lack of awareness of the potential shortfall. According to the Pensions and Lifetime Savings Association, just half (50 per cent) of self-employed people say they’re not confident they’re putting enough aside for later life, compared to a far greater four in five (80 per cent) of the general population.
A recent report on pensions from the Department of Work and Pensions laid out its approach to increasing pension participation for self-employed workers. Previous plans to extend auto-enrolment have been abolished and replaced with plans to trial new marketing strategies to encourage saving.
Vivek Madlani, co-founder and CEO of Multiply, said: “Freelancer finances are a ticking time-bomb. Huge numbers of people are now choosing to be their own boss and with so few of them making proper retirement provisions, it has the potential to cause serious problems down the line. It’s clear that self-employed people need more support.”