Tag Archive | "self-employed pensions"

73% of Self Employed Called “Financial Underclass”


Many think self employment is all about living the high life. Not true. New research says that self employed are the “financial underclass.”

This research was compiled by a financial services company who obviously know what they are talking about when it comes to the subject of money, so it makes sense that we should all sit up and take notice about these findings.

The exact figure they came up with was 73% of self employed people, who, in their findings, are behind when compared to traditional employees in areas such as earnings and pension plans.

Delving deeper into the figures, we find that self employed typically have, on average, £200 or less of discretionary income a month when compared to full time employees, which isn’t exactly ideal now is it.

One media expert commented that this has a lot to do with the “Uberisation” of the employment market, where workers are basically being forced into self employment against their will and then stripped of any benefits that traditional employees enjoy.

While this can happen (and it does), in my opinion I reckon that many of the freelance type jobs offered by companies such as Uber are fair game and they are doing nothing wrong, but that is a subject I’ve covered fairly extensively here on this blog.

As for the point about 73% of the self employed being the so called “financial underclass?” Well, yes they are, and always will be, when you consider that around 95% of the wealth is controlled by 5% of the population.

However, that doesn’t mean you can’t become self employed or start a business and become very successful. In my opinion, forget about these kind of statistics and just focus on doing what you do best, and then making a lot of money doing it.

The one point I do agree on is that self employed people in general are not fairing very well when it comes to the subject of pensions, with many contractors, freelancers, and small business owners who have no kind of savings or private pension at all.

This is pure madness of course, and will ensure that there is an army of freelance workers who are still putting in the hours when they are well past retirement age. It’s unfortunate, but true.

Better education about pensions for self employed is the way forward, and although the government have made a few moves to resolve the issue, more still needs to be done.

Perhaps auto-enrolment pensions could be the way forward for our self employed workers? Maybe, but I think it could be difficult to implement, especially as more and more people are now working for themselves in the freelance, contracting, and gig economy.

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UK “The Worst” for Self Employed Pensions


A team of pension experts recently took to the streets of 15 countries around the world and their findings were not exactly surprising.

Out of the 15 countries across Europe, Asia, the Americas and Australia, it was the UK that was ranked “the worst” for how many self employed people had their pensions sorted out.

Regular readers of this blog will be only too aware about how I’ve reported that many contractors, freelancers, and small business owners are just not educated enough about self employed pensions. Unfortunately, they are going to find out the harsh truth when they get to retirement age.

Looking at the numbers, the team of pension experts were shocked to discover that only 52% of the 4.2 million self employed people in the UK did not have any kind of independent pension. So that is a lot of people that have decided to rely solely on the government State pension, which in my opinion, might not even be around in 20 years time.

Compare this to an average of 36% that did not have a pension across the other 14 countries, and it becomes clear that in the UK we really need to push the message across to every self employed worker out there…

“You need to get your pension sorted…ASAP!”

I’m sure this is what they have been doing in India where only 12% of those surveyed mentioned they had no plan for a retirement pension. So that is 88% who have really got their act together it seems. Well done India. UK take note.

Actually, one of the main reasons why India are so clued up when it comes to the subject of independent pensions for the self employed is because they have no welfare system like here in the UK.

The same can be said for Brazil, China and Turkey as well, where the majority of those surveyed said they were actively saving into a pension.

However, the same can’t be said about countries similar to the UK that also have a welfare system, because France, Spain and Australia only did a bit better than over here, with many clueless about what to do for their retirement.

One thing I do know is that the team of pension experts must have been baffled when roaming the streets of the UK and talking to the self employed people of our nation.

I can imagine the look of bemusement on their face as…

Only 10% of those who have a retirement plan had it written down.

56% said I don’t have any kind of plan.

52% expected to be working past the age of 65.

49% said they plan to rely on the State pension from the government.

My advice on this, if you are self employed and don’t have any kind of plan for retirement and your pension…get it sorted as soon as possible. It really is the only way, because you don’t want to be still working when you are 75, or even 80.

The government are thinking about bringing in some kind of auto enrolment scheme for the self employment, similar to what they have in many companies for employees. Although it might be a while until we see that happen.

For now, you really need to take control of your own situation.

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Disturbing report finds self-employed pension pots shrinking


Distinguishing yourself from a regular employee is one of the benchmarks of dodging the IR35 bullet.

A recent pensions report from the Resolution Foundation highlights one area where one-man-band contractors need to at least aspire to the way permies think, even if copying them is difficult.

The report analyses self-employed pension contributions since the turn of the century.

The results are massively at odds with the rise in volume of people choosing to go into business for themselves.

The two snippets that make the most interesting at-a-glance reading are:

  1. the widening of the self-employed/permie pension gap (male);
  2. percentage of self-employed actively contributing to a live pension scheme.

The Pension Gap

It’s one of the things we took for granted as an employee: employer pension contributions. Newsflash: there is no employer once you go it alone to navigate pensions for you!

The government has even adopted a TV campaign to highlight what an employer should be doing to help secure your future post retirement. Brainwashing? Well, not if you want something to live for after you’ve handed in your final timesheet.

When we leave that safety net of permanent employment, our focus becomes blinkered. In creating our business, continuity of work, accounting and marketing all take precedence.

To some extent, that’s wholly understandable. The destiny of the roof over our head, bills and our own lifestyle are all now very much in our hands.

The report adds other realistic explanations as to why fewer self-employed now pay into a pension fund.

What it doesn’t mention is the fact that many of the policies we had whilst learning our skill set as an employee are less advantageous as a contractor or freelancer.

Most pension schemes are irrelevant to the self-employed

To make the most of pension contributions, most self-employed people would love to contribute before they pay tax. If they’ve set up a limited company, a Relevant Life policy enables that.

But there are few other options available, which is why many representative bodies are leveraging the report to lobby the government.

The government must do more to help self-employed people save for life after contracting.

This is particularly true of freelancers. Many supply an inherent or learned creative service. The report suggests that one of the reasons this sector has tailed off making contributions is because they can sell their business upon retirement.

When your talent is your business, selling a business as a going concern falls down completely.

Who is contributing to self-employed pension schemes?

This argument is backed up by the second interesting tidbit. Here are a few dynamic facts and figures, set against the backdrop of a rise in the number of self-employed of 900,000 in this period:

  • between 2001/02 and 2012/13, the number of self-employed people paying into a regular pension scheme dropped from 1.1M to just half a million;
  • total contributions (adjusted in line with inflation) also almost halved, dropping from £3.4bn to £1.9bn;
  • for those who kept their pensionn pot active, the average contribution actually rose by approximately 25%, from £2,994 to £3,760.

The report suggests that many who were part-time or on low income forfeited their contributions in the aftermath of the housing bust in 2008. That’s certainly when figures took their greatest slump.

But more telling is the type of self-employed individual who’s carried on contributing. The numbers change dramatically when the self-employed people themselves have dependent employees.

Those who take on staff are more likely to contribute than sole traders and independent freelancers and contractors. Leading by example or accepting the gauntlet of providing pensions for others may well be behind that shift.

With recent pension changes, it’s time for everyone (not just independent professionals) to review what the new pension laws mean to them. Moreover, if you’re self-employed and don’t fancy the commute across London into your nineties, now might be a good time to get your pension sorted.

Buck the trend in the Resolution Foundation report, as there really is no one else to pass the buck to when you’re your own boss.

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