Britain is apparently the worst country in the world when it comes to the self-employed planning for their retirement.
A recent study of 15 countries found that more than half of self-employed people in the UK do not have a retirement plan in place and only a fifth think they will be comfortable when they retire.
These are worrying statistics, but they’re not surprising considering how little the government currently does for those who are self-employed. The fact that we’re below average in this area is partly down to the self-employed being exempt from being auto enrolled into a workplace pension – and the problem will only get worse should the State Pension age be increased as is looking likely to happen as for many self-employed the State Pension is their main source of income in retirement. There’s also little incentive for self-employed to personally invest for their retirement as they don’t benefit from employer contributions.
Granted, some self-employed people may be relying on selling their companies and using the profits as their pension, which is fine, if it all goes smoothly.
The government is looking into addressing the issue and it is part of the auto enrolment five year review that is currently underway, which is a start. One way around the problem, could be to give the self-employed further tax breaks when investing into a personal retirement plan to balance out the current inequalities.
Stuart Price