Are self-employed workers saving and paying themselves enough?
Analysis by the Resolution Foundation (RF – the UK ‘Think Tank of the Year 2013’) of national datasets and a new survey of just under 1,000 self-employed people, suggests that there is strong evidence of a significant structural element, but that there does also appear to be an important cyclical component contributing to recent self-employment growth.
Alongside what this means for the economy, the RF has looked at how self-employed people are faring financially. The analysis finds that self-employed weekly earnings are 20 per cent lower than they were in 2006-07, while employee earnings have fallen by just 6 per cent. The drop has been seen across genders and industries but is particularly notable among people of prime earning age (35 to 50 years old) whose earnings are 26 per cent lower. As a result, the typical self-employed person now earns 40 per cent less than the typical employed person.
The analysis paints a worrying picture of the security and vulnerability of self-employed people on both a short and long term horizon. Only 30 per cent of self-employed people are contributing to a pension, compared to 51 per cent of employees. The survey also indicates that a minority of self-employed people are experiencing difficulties getting mortgages, tenancies and accessing personal credit and loans, specifically due to being self-employed.
If high levels of self-employment are set to be a permanent feature, it is crucial that this 15 per cent of the workforce are able to access basics such as housing and credit and have sufficient pensions and savings. The RF analysis suggests that for too many self-employed people, these essentials are proving difficult to access with many looking to be poorly positioned to cope with unexpected financial demands and retirement.
If you are self employed and would like some advice on how to ensure you do make adequate plans for retirement please get in touch on 01245 560 570.