In August 2017, Larsen Howie reported on the problems contractors and other people who work for themselves are having when it comes to putting aside money for later life.
Without the security of a pension plan forming part of your ordinary employment, many contractors risk problems after retirement. Quite simply, they are not putting enough aside now.
A new report has brought the very real problem of pensioner impoverishment to the fore. The report, from the Joseph Rowntree Foundation, indicates a rise from 13% in 2011/12 to 16% in 2015/16.
In response to the report, the Association of Independent Professionals and the Self Employed (IPSE) pointed to the ‘self-employed savings crisis’. This crisis it describes as a ‘ticking time bomb’ - a severe warning if ever there was one.
“At the last official count in 2015, only 17% of self-employed people were paying into a pension – just half the 2003/4 high of 34%,” explained Jonathan Lima-Matthews, Senior Policy Adviser at IPSE. “IPSE’s own survey of freelancers over the last year also found that 16% were not saving for later life at all – through pensions, ISAs or any other method. It has been some time since the government last officially counted the number of self-employed people paying into a pension. The figures make for alarming reading and show how important it is for the government and pensions providers to act.”
The government’s Department for Work and Pensions has announced it will be publishing a review this month. In it they will examine the possibility of automatic pension enrolment for self-employed workers.
“We hope this review will not only help to highlight the issue of low pension uptake among the self-employed, but will also offer some practical next steps to improve the situation,” Lima-Matthews commented.
IPSE will be carrying out a similar study into how the self-employed save for later life. The results are scheduled to be published in early 2018.
The findings of this report will also make for interesting reading for contractors. There are many pointers for how to better prepare for retirement from a financial perspective.
We’d encourage all contractors to consider how they are to afford to live after retirement. Look into taking the necessary steps to better secure financial stability in later life.