For some time now – well, at least over the last few months – the UK’s burgeoning contracting and freelancing community have been receiving platitudes. ‘Britain is the freelance capital of Europe’, they say, with the ‘most mobile and resilient workforce out there’, they say.
Which is all lovely, heart-warming news: everyone likes a pat on the back, right? Well, there is something a little more alarming that contractors need to focus on. The subject is pensions, and more pointedly pension planning. To help shed some light on the pension shortfall amongst contractors, we spoke with Umbrella’s Group CEO, Stewart Davis earlier this week.
“Somewhat disturbingly, figures from around the contracting industry hint at nearly two-thirds not having anything in place as regards saving for a pension. Government initiatives like auto-enrolment shunts people working for companies and institutions towards a pension-ready future. However, there is no such facility for contractors and freelancers. So the responsibility falls to the individual to make sure they are fully aware of their options. Those who are using an umbrella company will find that they are auto enrolled through the umbrella”
“And its no good just relying on state pensions: almost one-third of respondents to a Prudential survey indicated that state pensions are their only plan when it comes to income after retirement. So what can be done?”
“We have already seen pressure placed on the Government to include the self-employed workforce in wider state pension schemes. Also, there have been voices clamouring for freelancers and contractors to be given more access to statutory benefits such as maternity and sick pay.”
“We have also seen interest in adding self-employed people to a tax-incentivised auto-enrolment scheme. Individuals must consider their future, and make plans accordingly. Think about carrying forward unused annual allowances, which is definitely an option for those older self-employed workers who have moved on from an old, fully paid company scheme from past working lives.”
“However, the biggest battle is quite simply the lack of faith people from all working backgrounds have in pensions. They are taxed, seen as low value returns and simply not trusted by too many. Its time a Government restored that faith, and time for some contractors to really stand up and look after their own futures better.”