One-man bands 'far behind' in retirement saving
The average Briton with their own business is “falling far behind” in their ability to put cash away for when they stop working for themselves, a survey shows.
More than seven in ten self-employed people say they don’t have a pension and -- of those who do -- half of them do not know how much it is, found Drewberry.
Out of this 27% who are building some sort of nest egg, nine in 10 of them said they do so by contributing “10% or less” of their take-home pay in regular instalments.
The survey also found a reason behind what might be regarded as a low proportion being put away for retirement -- 63% of all the respondents said they were ‘just about managing’ with day-to-day living expenses.
A similar reasoning emerged among the two-thirds who had no pension arrangement, as they admitted they simply “couldn’t afford” to put one in place.
Hoping to spur them into some sort of retirement saving action, Drewberry’s director Tom Conner reminded that it could be at least a decade until the government’s pension initiative of ‘auto-enrolment’ is rolled out to the self-employed.
He pointed out that someone who starts a self-employed pension plan at age 25 will have around twice the pension pot at age 65 as someone who waits until they are aged 35, and four times as much as someone who does not start until they are aged 45.
These calculations, which assume a basic-rate taxpayer invests a flat £250 a month, along with tax relief, involved a notional fund that delivered 6% a year compound growth.
The arithmetic might convince business soloists to stop delaying -- 19% of the survey respondents were of pension age today, but they are almost three times more likely than employees to have put nothing away for retirement until their mid-30s.
There is one financial buffer that could help however. Almost a fifth of those quizzed (including those who said ‘no’ to having their own private pension) said they had a company pension from when they were an employee.