The self-employed are facing a pensions black hole unless they start making provision and saving for retirement now. Just over a third of the nation’s 4.5 million self-employed are adequately prepared according to recent research by Scottish Widows. Currently one in ten self-employed workers are not actively saving into a pension (this was from a poll of 5000 people), in contrast to the Governments automatic enrolment for employees, now helping this group address their pension provision far earlier in life. The self-employed on the other hand are not supported by the Government with their pension provision and are at risk of slipping through the net as their total pension savings still fall woefully short.
Whilst you are busy in the here and now establishing your freelance career, it is easy to neglect the importance of providing for your future. This could prove to be a very risky approach as nine in ten self-employed say that they will need to work after the state retirement age as they start to run out of cash.
Don’t rely on the Government to fund your retirement
The reality of the state pension will provide most Contractors with an insufficient pension pot upon retiring. Having established a career as a Contractor over your working life, you will undoubtedly have reaped the benefits as your earnings tend to be greater than a regular employee and you are likely to become accustomed to a certain standard of living. The Government state pension will simply fall far short of the cash you will need to sustain this in to retirement. The advice from our trusted experts at Contractor Financials is to not fall in to the trap of relying upon the state and to make personal provision from early on in your career.
Don’t underestimate the cost of retirement
In a survey of 2000 adults conducted on behalf of JLT Employee Benefits, 42% had no idea of what their pension pot will be worth. Of those 2000 adults a huge 72% intended to fall back on the state if they were to have a shortfall in their savings. This makes for alarming reading as even if individuals are making some provision, over a third were concerned that their money would only last 1-5 years. With 55% of the poll underestimating how long they could live for, it is vitally important that as a Contractor you seek financial advice.
Seek advice on your pension requirements from a professional adviser
Each individual has a unique set of pension needs and it is advisable to get a projection of your future financial requirements from a specialist. Once you have recognised your retirement goals, an Adviser will be able to help you make the investment you need to achieve them, and taking in to account your attitude to risk, will be able to help you invest your funds in a suitable selection. However, it is important that you regularly revisit your investments to ensure that your nest egg is performing in line with your expectations and goals, don’t leave your pension to gather dust as this can lead to missed opportunities.