More and more contractors shun pensions
The pensions system not being ‘freelance-friendly’ enough has been blamed for a 12% rise in the number of contractors and other one-person traders who are failing to save for retirement.
Almost two-thirds of people who work for themselves avoid paying any money into a personal pension scheme, according to Nixon Williams, which surveyed 1,000 contractors.
That suggests that 2.9million freelance professionals are not saving for when they stop work, given the UK’s total freelance workforce of 4.5million, the accountancy firm calculated.
“Speaking to the contractors and freelancers we work with day-to-day, we find that one of the biggest barriers to enrolling in a private pension scheme is the fact that they render their earnings completely inaccessible until at least the age 55,” said the firm’s CEO Derek Kelly.
“Working on short-term contracts or projects makes that an unattractive option for many self-employed people, with many preferring to keep spare earnings close at hand for a rainy day, or to help with periods when they may be between contracts.”
So Kelly “waits with interest” to see what “traction” around the Taylor Review results in, as it made pensions recommendations for the self-employed -- workers it acknowledges shun retirement saving.
'More needs to be done'
“The Department for Work and Pensions announced last year it was developing new ways to include self-employed workers in pension schemes, taking advantage of one of the last remaining tax breaks post-IR35,” he said.
“But we're yet to see how that will materialise into actionable change. We await that with interest, but it’s very clear to us that more needs to be done to make personal pensions more attractive to the millions of hard-working contractors and freelancers that play such a vital role in our economy.”
According to the survey findings, independent workers aged between 31 and 40 are the least likely to be paying into a pension scheme, with just 44% currently contributing to one.
That compares to 58% of 41-50-year-olds, who were the age range most likely to be saving into a defined contribution scheme. The total stock of non-contributors is up 12% on 2018.
This year’s survey also found that almost 59% expect to be working past the age of 64, suggesting the majority of self-employed workers now plan to be working way beyond the current state retirement age.
“Without any real action, there is a danger that this trend will continue,” Mr Kelly said. “For some it may be a choice, but for others not planning for their retirement could mean they’re still working well into their 70s or even 80s.”
Editor's Note: ContractorUK readers can get their pension affairs in order, or even simply enquire about starting a pension, by speaking with financial experts at Contractor Wealth.