A new report published by ONS, suggests that just 1 in 5 contractors are putting any money away for their pensions.
This worrying statistic is in stark contrast to the pension reform which has swept through much of the workforce in the last 4 years, with many employed people now being automatically enrolled into pension schemes from their employers, which ultimately ensures they will have more money in the bank when it comes time to retire.
However, contractors don’t have this luxury, and it is up to them to put money away for retirement but it seems that only 20% are doing this.
Why? In my opinion it has a lot to do with not planning enough for the future, as many contractors in the UK will be in their 20’s and 30’s, which means they might not yet be thinking about retirement and saving for their pension.
Another reason is they simply don’t have the money to put away every month, especially during times when work might be slow and they are only just getting by.
At the end of the day, in this post Brexit economy not every contractor and self employed person is finding it easy, and although things will no doubt change as the economy gets better, for now many contractors are having to do their best and take whatever work comes their way.
The report by ONS goes on to suggest that better education about pensions for contractors could improve the situation.
I agree completely, because there are a lot of self employed people in general that just don’t have all the facts, and would benefit greatly from more help in regards to setting up pension schemes and getting accurate information about the best way forward.
Not only that, but putting money into a pension scheme also has other benefits, such as tax relief and investment returns, meaning that most contractors would get a lot out of putting a bit of money away every month.
It’s interesting to note that figures show an average 22 year old contractor with earnings of £25,000 a year, could have a pension of nearly £200,000 by the time they reach retirement if they invested money into a scheme similar to the auto enrolment seen in the workforce.
As they say, a little bit each month soon adds up, and I am sure that most contractors would enjoy an extra £200,000 by the time they retire, on top of the usual state pension of course.
It is definitely something worth thinking about for the millions of contractors out there, because if only 1 in 5 are currently doing something about retirement, then there is many more that need to get educated and take action.