New suggestions have been made in a bid to encourage freelancers to contribute to a pension and look towards retirement. This follows the news that the number of self-employed people could actually outnumber those who work in the public sector by this time next year.
Think tank Demos has suggested that self-employed workers should be allowed to access some of their pension contributions as a way of knowing that their money is being protected and will be available to them once they retire.
At 30 per cent, less than one in three freelancers actually has a pension compared to the 51 per cent of employed staff who have one. According to Prudential, this means that those who are self-employed will miss out on up to £91,512 over their working lives because they don’t receive any contributions from a company pension scheme. However, it must be stated that the amount in which someone can get in pension contributions from their employer does differ depending on the industry or sector in which they work.
The Office for National Statistics (ONS) depicted last month that the number of those who are self-employed has dramatically increased by 404,000 within the past year to 4.58 million. This positive news highlights the importance of ensuring that freelancers feel confident about using a pension and looking towards the future.
Demos has highlighted in their new ‘Going it Alone’ report that there would be greater flexibility in allowing contractors access to some of their pension, reducing the risks that other forms of savings can have, should that be what an individual had decided to do instead.
If this suggestion is actually put into action, it would have a significant impact on the trust that the self-employed would be able to have in a pension. Knowing that their money hasn’t essentially been put somewhere that they can’t reach, which is something that is often perceived, will only help to encourage freelancers to think further about the future.
Research director of Demos and author of the report, Duncan O’Leary, said: “This model would make it safer for the self-employed to save for their retirement without the fear of any rainy days that may be around the corner.”
Interestingly enough, not having a pension is more common among self-employed women and the majority don’t have any pension savings at all. This is particularly notable given that the increase in the number of self-employed women was higher than that of self-employed men at 4.1 per cent compared to 0.7 per cent.
This increase is perhaps due to the flexibility that freelancing allows, which does work especially well if you have a family or other personal commitments that need to be included in your every day life.
Demos has taken this into account in its report and has also suggested a new opt in allowance for maternity and paternity leave. It would reward those who decide to contribute some money to cover the cost of the time missed at work should they have a child. Again, this is extremely positive news and such stability will only increase the rights allowed to the self-employed.
While the suggestions that Demos has made are particularly important and vital, freelancers need to take action now to ensure their futures are secure.
Stan Russell, retirement expert at Prudential, said: “Self-employed workers have to be even more proactive when it comes to saving for retirement.”
I am a chartered tax advisor with a specialism in the freelance contractor sector advising contractors on how to structure their affairs and recruitment businesses and end hirers on the effective…
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