Later Life Poverty for the Self-Employed?
Are you self-employed? If so, will you be able to afford to retire at some point in the future? If you haven’t given much consideration to your personal pension provision among your other responsibilities, it’s worth stepping back to do so.
In today’s terms, the new “flat rate” State Retirement Pension is £155.65 per week (from April 2016). Honestly, would you be able to live on this?
Whilst this may help with post-retirement finances, anyone younger than 38 on 6 April 2016 will have to wait until they are 68 to draw this pension. Will you be able to, or do you want to, continue working until you are 68?
A report by the Resolution Foundation in May 2014 indicates that you and the other 4.7m people (ONS 05/2016) make-up 15% of the UK workforce and that the number of self-employed people making annual contributions to a pension has halved in a decade . By contrast, an article in the Guardian on 03 March 2016 stated that, by the end of 2015, 64% of employees had a pension, up from 59% in the previous year, with the increase attributed to auto enrolment.
The apparent success of auto enrolment demonstrates that human nature is not to plan for the future unless there is some form of compulsion. Since 1921 tax relief has been available on pension contributions, but that alone hasn’t been sufficient over the years to encourage sufficient people to save for their retirement. This is graphically demonstrated by the abject failure of the 2001 Stakeholder scheme to significantly increase the take-up of workplace or personal pensions.