Recent figures from the Office for National Statistics (ONS) indicated that there are almost five million people in self-employment; however, research has suggested that this could have a major impact on millions of people’s pension savings.
Supposedly, workers who become self-employed in their mid-30s risk having a pension fund shortfall of £115,300 compared with those who stay in an occupational scheme. This assumes wage growth of three per cent and investment growth on the funds of 4.25 per cent after charges.
Moving from employment to self-employment could have hidden pitfalls, because although the minimum employer contribution level under the auto-enrolment scheme is three per cent, according to research, many employers will pay more than this or even match personal contributions.
Also, the latest figures from HM Revenue & Customs (HMRC) revealed that the self-employed receive only 1.5 per cent of the overall pensions tax relief granted by the Government, which is concerning considering this group makes up around 15 per cent of the UK’s labour market.
This lack of savings is a worry for the future, as the self-employed could find themselves lagging behind; however, some steps can be taken to ensure a comfortable pension pot is available for their retirement.
Steve Horton, Financial Services Partner at Milsted Langdon Financial Service said: “The research suggests that many self-employed people are not taking adequate measures towards planning for retirement.
“If you are concerned about your financial future after work then it is important that you seek specialist advice to discuss the range of options available to you.”