Saving for retirement may be on most people’s minds, but not everyone is able to put away much, let alone enough, for when the time to retire comes. For those in employment things are a little easier. The introduction of auto-enrolment pensions has increased the number of those who are putting money aside for retirement with employers’ contributions being an important reason for this. What happens to those who are self-employed though? Our independent financial advisers have been watching developments closely as the government’s ongoing trials to boost retirement planning for the self-employed continue. For details of our London-based team of advisers, visit www.plutuswealth.com.
Increase in self-employment
There has been a marked increase in the number of people who are self-employed in the UK. According to the Office of National Statistics (ONS), the latest available figures show an increase of 3% between 2001 and 2017. This corresponds to an increase from 3.3 million (12% of the workforce) to 4.8 million (15% of the workforce) during that time. Since the economic downturn self-employment has also formed a significant contribution to the drop in unemployment figures, larger than that of employment.
This trend is only expected to continue as flexible working is increasingly appealing to many to help juggle work and life outside of it. With this, however, comes some financial uncertainty as income can fluctuate from one month to the next for many, particularly those who work part-time or are involved in the ‘gig’ economy.
What does it mean for retirement savings?
The increase in self-employment means that for many there is no longer an employer contribution to a pension pot. For many who have never had a pension it may even mean that there is not even a scheme for them to pay into as they may have never set up a personal pension pot.
The government has been helping workers to get saving for retirement by setting up auto-enrolment pensions and rolling the scheme out across all industry sectors and all companies, regardless of how few staff they may employ. By making it an opt-out scheme, the benefits of employer contributions coupled with government tax relief have been welcomed by an increasing number of employees. This has been credited with enrolling almost 10 million more workers on to a pension scheme since 2012.
Auto-enrolment does not apply to the self-employed, however. While the government initially planned to roll this out more widely, it has been recognised that there are some big challenges and it has now been replaced with a number of trials to help boost retirement savings in other ways.
Ongoing trials
Launched in December 2018, the government trials are designed to test different ways in which retirement planning and saving take-up can be increased for the self-employed. This includes understanding:
- What makes it easier for people to save for retirement – e.g. availability of schemes and ease of making regular contributions, such as through accounting systems.
- How messaging about retirement saving is perceived – i.e. what works and what doesn’t and how the effectiveness of different approaches can be measured.
If you are self-employed and want to start saving for your pension or increase your contributions look out for these ongoing trials and get involved. The government is working with:
- NEST Insight, to test messaging and marketing interventions. You can get involved as a research partner on identifying way to improve engagement.
- Lloyds and Barclays banks, to test attitudes and habits through focus groups from their self-employed customer base.
- NEST and Aviva, to begin testing messaging in the first half of 2019.
Starting in the final quarter of 2019, there are also plans to test tools that could increase pension savings, such as through accounting systems or invoicing and payment systems.
How you can save for retirement now
If you are self-employed and worried about retirement planning it is never too late to do something about it. Talk to your independent financial adviser today about how to start a pension or make more of one you already have. At Plutus Wealth we have a team of qualified, independent financial advisers who will work closely with you to help you get the most out of your money.
Call or email us on 020 7871 5200 or at info@plutuswealth.com and we’ll help you make the most of your future.
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