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Official figures released yesterday reveal that the number of Brits who are self-employed increased to 4.8 million in 2017, which now accounts for 15.1% of the labour force. This growth is not reflected in pension statistics, however, with 45.1% of self-employed 35 to 54 year-olds having no pension whatsoever.
This is compared with only 16.4% of employees aged 35 to 54 who have no pension wealth, according to the Office of National Statistics. And even more worryingly, 30.3% of those aged 55 and over who are self-employed have no pension wealth either, which could mean they may never be able to have a comfortable retirement.
Other figures do show that self-employed 55-plus Brits are a lot more likely to have property wealth, with 28.3% even having £500,000 or more in property wealth, compared with 12.7% of employees. This may mean that they are relying on buy-to-let or equity release wealth to see them through retirement.
However, property alone does not a stable pension make. Tom McPhail of Hargreaves Lansdown was even more ominous: "These statistics point to an impending pension crisis for the self-employed, with millions of them heading towards retirement age with no pension savings to draw on [and] no immediate prospect of the situation improving."
Tom Selby, senior analyst at AJ Bell, suggests that the self-employed could still benefit from pension tax relief, even without the matched employer contributions that make automatic enrolment so attractive. Alternatively, there's the Lifetime ISA, which "provides a more flexible alternative to a pension, particularly for self-employed workers who remain basic-rate taxpayers.
"However, the 25% early withdrawal penalty imposed by the Government and the age limit of 39 restrict the attractiveness and availability of this product to self-employed workers." So, there may not be an ideal solution, unless the Government steps in to help. But that shouldn't stop people from making plans for their retirement.
No matter how far away you are from retirement, it's never too early to start setting some money aside for your retirement. If you're not eligible for a workplace pension and you'd rather not set up a private pension, consider setting up a dedicated savings account or ISA at the least.
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