Freelancers are struggling to find ways to put money aside for their retirement savings, according to a national survey from IPSE, the Association of Independent Professionals and the Self Employed.
The research discovers that nearly half of independent professionals will be unable to access Lifetime ISAs (LISAs) due to the age cap of 40. IPSE calls on government to allow the self-employed to access LISAs up to retirement age.
Struggling to save
When independent professionals are deciding on when to retire, the most important factor they consider is their financial security (79 per cent). Of those who intend to work past the State Pension age, almost four in ten say this is because they want to be able to financially support themselves (37 per cent) on their retirement savings.
When it comes to saving for retirement, the research shows that property is the only savings vehicle freelancers feel confident will support them in retirement (56 per cent). Meanwhile, 40 per cent of respondents are not confident in using their retirement savings (excluding ISA).
Nearly one in ten (9 per cent) whose age qualifies them for the new State Pension do not believe they will be eligible for it, and 11 per cent do not know whether they would be entitled to it or not.
Previous research from IPSE in 2015 found that 16 per cent of freelancers are not saving for their retirement at all. Less than two-thirds use a pension fund (63 per cent) as a means to save, and a third invest in property (33 per cent).
IPSE chief executive, Chris Bryce, thinks that too many independent professionals are having to work later in life to keep themselves financially stable and many are not confident in finding ways to save for their retirement at all.
Bryce continues, ‘IPSE urges Government to call on NEST to create a flexible pension solution for the self-employed, allowing them to withdraw the last two years of contributions without a penalty. This would not require any additional contribution from government. The scheme would be solely funded by the payments made by the self-employed person.
‘Pensions are a ticking time bomb for the self-employed, so we implore Government to use Autumn Statement to drive innovative solutions to help this vital sector feel more financially secure over their future.’
Many unable to access LISAs
LISAs were announced by the government as a potential long-term savings vehicle for the self-employed, however our results show there are barriers to their use.
Almost half (46 per cent) of respondents report they are ineligible to use LISAs due to their current age, while almost a quarter (24 per cent) do not know if they will use LISAs.
And of those that do not intend to use or are unsure whether they will use the scheme, almost two thirds (63 per cent) say this was because they do not know enough about it.
Bryce believes the problem lies with age as too many people are above the age cap.
He says people just aren’t saving when they’re 20 or 30, and in fact the largest proportion of freelancers are over 40 years old.
Bryce concludes, ‘The Chancellor should use the Autumn Statement as an opportunity to extend LISAs, removing age as a barrier, and allowing larger maximum annual contribution to be made.’