UK Self-employed Workers at the risk of Financial Downfall
According to a new study, a number of self-employed UK retirees may be at risk of financial downfall due to this huge flaw in old-age savings. The self-employed pension gaps could overwhelm the state pension, which in turn increase the rate of pensioner poverty and also shift the living standard downward.
The Impending Crisis
According to the Association of Independent Professionals and Self-employed or IPSE, the rate of self-employed workers increased up to 50% since 2000, with the current consensus reaching up to 5 million people. Since most self-employed professionals only have to pay voluntary contributions, the research institution noted the huge difference between their retirement savings compared to employed workers.
Furthermore, the study finds that most self-employed workers are saving their retirement and pension funds at a later age of their life compared to employed workers where they get enrolled in workplace pension automatically. This could undermine the future of self-employed workers in the long run.
According to IPSE senior policy adviser Jonathan Lima-Matthews, the state’s pension has already been under fire for the past few years and its future has been questioned ever since. Jonathan says the state pension may not have been enough to support every UK retiree.
Failure to alleviate this problem, along with the impending self-employed pension crisis exacerbates the state’s burden further. He adds that if most self-employed workers will have to rely on their modest state pension to support their life after retirement, rather than getting a supplementary source of income, the country may have to face an increased rate of pensioner poverty, which causes our living standards to shift downwards according to Lima-Matthews.
The IPSE blames this impending crisis on the lack of an auto-enrolment feature for self-employed workers and inaccessibility to old-age savings, which puts them at a disadvantage of building their retirement funds late. According to financial experts, most self-employed workers will have a hard time growing their money to its maximum potential due to the constraint in time.
Aside from that, most workers tend to spend their money on paying their bills and other immediate priorities than building their retirement funds.
Lima-Matthews suggests self-employed workers should have a so-called “sidecar pension” which can help them build their pension and retirement funds while allocating separate emergency funds at the same time. Aside from that, other solutions like midlife retirement savings, or MOT, should be introduced by the government to the self-employed workers.
The IPSE also encourages the state schools and universities to integrate financial education to help their students manage their finances properly before they enter the corporate world. According to Lima-Matthews, having the right knowledge will help the self-employed and freelance workers to resist the temptation of building their retirement funds at a later date as the gig economy continues to bloom.
The Challenges in the Gig Economy
Despite the rise of gig economy, the Old Mutual Wealth head of retirement policy Jon Greer states that most self-employed professionals face the lack of uncertainty when it comes to their jobs and the stability of income, which makes it difficult for them to engage in long-term savings like retirement funds and pensions. In fact, only 30% of self-employed professionals are saving for their pension. Ms. Kate Smith of Aegon Pensions echoed a similar statement.
According to her, the government and the policymakers must support this diverse and growing workforce to make sure every worker, from plumbers, freelancers, to accountants are entitled to the same right to live their retirement comfortably.
Aside from auto-enrolment pensions, Ms. Smith adds self-employed workers should also be entitled to digital tax for them to process their documents and legalities everywhere in the country. According to her, most self-employed workers are having a hard time filing their taxes due to the unclear categorization for freelancers.
Thus, making it hard for them to apply for retirement funds since they don’t have proper tax filing. Furthermore, paying your taxes often could act as a trigger for people to consider saving at the same time.
More in Career Counseling
Reese Witherspoon’s Beauty Secret for Youthful Skin is Simpler Than You Think
The renowned actress Reese Witherspoon serves as an inspiration to millions of fans who are mesmerized by her fresh and young face despite...March 16, 2019
Spiritual Books You Need to Read to Achieve Inner Peace
If you are trying to figure out which books you should read, we have compiled a list of spiritual books which...March 15, 2019
Tips on How to Deal With Criticism at Your Job
It can be rather stressful and annoying when you work really hard, and the only thing you hear from your colleagues...March 15, 2019
5 Foods That Can Lull You to Sleep
Dealing with hectic schedules on a daily basis proves to be a challenging and stressing. Most people find themselves waking up...March 15, 2019
Study Reveals Using Pet Names in Relationships Helps Build Stronger Bond
The results of a recently conducted study revealed that calling each other pet names in a relationship actually helps to improve...March 15, 2019
Holly Willoughby Gave Up a £450,000 Coke Deal Due to This Heartwarming Reason
Family is one of the biggest blessings in life, without which it would be impossible for humans to appreciate and tolerate...March 15, 2019
Essential Life Lessons You Can Learn About Body Acceptance From Taylor Swift
One of the world’s most famous singers, Taylor Swift, has come a long way not only when it comes to her...March 15, 2019
Ladies, Pay Attention: Men Will Run Away from You If You Do This
Many girls and women think that personal appearance is the most important thing that men look for in a woman. Wrong!...March 15, 2019
The Unexpected Reason Why Jennifer Lopez Looks Young and Fabulous Even at 50!
Millions of J.Lo fans admire her not only as a renowned actress, singer, and performer but also for her ability to defy...March 15, 2019