Self-employed workers cannot afford to save for their retirement, new research from Prudential shows.
A nationwide study by the UK pension provider found that more than two fifths (43%) of those working for themselves admit they do not have a pension. This is compared to just 4% of those in employment.
More than a third said they can’t afford it and roughly the same proportion said they will be relying entirely on the State Pension. This is currently only worth around £8,545 a year to fund their retirement.
Saving for other reasons
Over a quarter said they will be reliant on their business to provide the income they need. And while many are savers, the research found that they are more focused on day-to-day emergencies than the long-term of retirement. Two thirds of the self-employed save to build up a safety net in case of an emergency. This compares with 57% of those in employment.
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Just one in ten self-employed people see a financial advisor regularly. This despite having potentially more complex requirements than someone in employment. One in five are not confident with money and financial matters, while a quarter worry that they do not know enough about money.
All this adds up to an education gap when it comes to the importance of pensions for the self-employed. Around a fifth admitted that they do not take pension saving seriously as they do not think it applies to them.
“Saving for retirement is tougher when you are self-employed as there is no one to organise a pension for you and no employer making contributions on your behalf,” Kirsty Anderson, retirement income expert at Prudential, said. “On top of that, self-employed workers often don’t have a regular income so many will focus on setting aside money as a safety net if they cannot work.
Time to think ahead
“Saving for a pension is still important as no one wants to work forever. And no matter what your employment status, having money to fund your retirement is essential as the State Pension is unlikely to be enough to fund a comfortable retirement,” Anderson added. “If you are unsure how much you can afford to save into a pension, speak to a financial advisor as they will be able to help you with all aspects of your financial planning.”