Millions of self-employed workers in the UK are leaving themselves at risk of financial insecurity later in life by not making any retirement provision. This is despite self-employed workers aged 65 and over being the fastest growing group in the labour market, having increased by 29% since the end of 2010.
Overall, self-employment has risen sharply in recent years now hitting a total of around 4.5million workers. This is a 650,000 surge since the start of the recession. But according to new research commissioned by think tank Resolution Foundation, as many as two-thirds are not investing in a pension policy.
Among the self-employed in their 50s and 60s only 36% report to having created a financial plan for their retirement, perhaps surprising considering this age group is closer to retirement and remains a large percentage of the rise in entrepreneurs and freelancers. Across all working age groups, the percentage of self-employed workers who are saving for retirement is 34%.
Conor D’Arcy, a researcher at the Resolution Foundation and co-author of the report: Just the Job or a Working Compromise? The Changing Nature of Self-Employment, said the lack of forward planning by the majority of self-employed workers would end up being detrimental.
“It seems there’s a growing appetite for self-employment which is not deterred by the financial difficulties that can go with it. Of course, lots of self-employed people are secure and comfortable, but there’s worrying evidence that some are financially vulnerable because of the specific problems a self-employed person can have in getting mortgages, credit or tenancies and in providing for their retirement.”
Why are the self-employed shunning pensions?
Finances and access to funds seem to be the prevailing issue behind the avoidance of pension planning by independent workers. The Resolution Foundation study found that the self-employed earn 40% less than their peers. Moreover, almost one in seven (15%) say they’ve been prevented from getting personal credit or loans because of their employment status. One in five (20%) say they were prevented from getting a mortgage for the same reason.
The Resolution Foundation says that with the number of self-employed people continuing to grow, politicians need to help these workers build up adequate pensions and savings.
Gavin Kelly, chief executive of the Resolution Foundation, said: “Self-employment is often a highly precarious existence which isn’t that well supported by public policy. High levels of self-employment seem likely to be here to stay and policy-makers have some catching up to do.
“The growth in self-employment over recent years has been astonishing – but the reasons for it are complex. Some of it can be explained by a workforce that is getting older and putting off retirement for longer, some of it may be down to our growing appetite for being our own boss, and clearly much of it is due to weakness in the jobs market meaning there are fewer other options.”
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Jermaine Haughton is a journalist and digital media professional.