A new report has found that a significant proportion of freelancers and contractors are struggling to put aside money for their retirement.
According to the Association of Independent Professionals and the Self Employed (ISPE), almost half of independent professionals will be unable to access Lifetime ISAs (LISAs) due to the age cap of 40.
LISAs have been introduced by the government as a potential long-term savings vehicle for self-employed workers. But 46% of the respondents IPSE spoke to were not eligible for LISAs due to their age, and a further 24% did not know whether they will use LISAs at all.
IPSE is now calling on the government to allow the self-employed to access LISAs up to retirement age. Furthermore, it has called on the government to work with its auto-enrolment provider NEST, with a view to creating more flexible pension solutions for self-employed workers.
According to IPSE’s report, the most important factor when it comes to choosing when to retire for 79% of those surveyed was their financial security. However, only property was consistently identified as a savings vehicle that would support freelancers and contractors into their retirement.
37% of those surveyed are intending to work past the state pension age to financially support themselves, while 9% of respondents whose age qualifies them for the new State Pension do not believe they will be eligible for it. A further 11% do not know whether they would be entitled to it or not.
“Too many independent professionals are having to work later in life to keep themselves financially stable,” said Chris Bryce, Chief Executive of IPSE. “And worryingly, many are not confident in finding ways to save for their retirement at all. IPSE urges Government to call on NEST to create a flexible pension solution for the self-employed, allowing them to withdraw the last two years of contributions without a penalty. This would not require any additional contribution from government. The scheme would be solely funded by the payments made by the self-employed person.
“For our part we have IPSE Futures for our members, which ensures they have greater flexibility and more control over their savings,” he said. “Pensions are a ticking time bomb for the self-employed, so we implore Government to use Autumn Statement to drive innovative solutions to help this vital sector feel more financially secure over their future.”
IPSE found that a major barrier to LISA use was a lack of knowledge about them, which 63% of those who said they weren’t likely to use the scheme pointed to as the chief reason.
Bryce added: “We welcome the introduction of Lifetime ISAs as a potential way for the self-employed to save, however, too many people are not able to use one because they are above the age cap. People just aren’t saving when they’re 20 or 30, and in fact the largest proportion of freelancers are over 40 years old.”
“The Chancellor should use the Autumn Statement as an opportunity to extend LISAs, removing age as a barrier, and allowing larger maximum annual contribution to be made. Too many people don’t know that LISAs will soon be available. There needs to be much better signposting. IPSE will be bringing the news to the self-employed community, but government and banks must do more to promote this savings vehicle so more people are aware of their existence.”