The self-employed are natural entrepreneurs. So why is our government ignoring them?
Supporting the self-employed could help unleash a needed wave of entrepreneurialism. So why is the government not acting? Camilla Esmund, senior manager at Interactive Investor, asks in today’s Notebook
Support needed for the self-employed
Over 4m people in the UK have decided to be their own boss, fuelled by the entrepreneurial dream or a better work-life balance. And although being your own boss has obvious appeal, these freedoms come with real financial challenges that can be more difficult to navigate when you’re self-employed.
There are several measures we’d like to see put in place to support self-employed workers. After all, this is not just about fairness, it’s about recognising the vital role self-employed individuals play in our economy.
It has been a big year for pensions in 2024, with rumoured pension reform dominating headlines, and the promise of a broader ‘pensions review’ from the new Labour government, which we are waiting to see. But, we are yet to see anything that speaks to the unique challenges faced by the self-employed. They seem to be ignored or forgotten. This neglect is worrying, given the increasing number of people opting for (or being pushed into) full-time self-employment. And at a time when we hear so much rhetoric about supporting and nourishing entrepreneurial spirit in the UK.
We published data earlier this year which should ring alarm bells for policymakers. In a self-employed survey using Opinium Research, we found that 60 per cent have less than £10,000 in pension wealth, and 38 per cent have no pension savings at all. Once again, the gender pensions gap shows itself, too – with 43 per cent of women having no pension compared to 35 per cent of men.
But this isn’t just about pensions, self-employed workers are also dangerously financially exposed more broadly. In fact, 15 per cent have no cash savings at all, and 31 per cent have less than £1,000 saved. Plus, our research also found that most self-employed workers do not have any other significant investment.
It’s high time policymakers paid greater attention to this often-overlooked segment of the workforce. There needs to be a concerted effort to integrate self-employed workers into the pension conversation, offering them a comprehensive level of support and resources in the same league as what’s available to salaried employees.
At Interactive Investor, we have long been very vocal on the need for greater financial literacy in the UK, but let’s also see some enhanced pension education to actually improve the awareness of existing services like Pension Wise to help the self-employed make informed retirement decisions. We’d also like to see the expansion of the Pensions Wise Access service, offering the service to self-employed individuals of all ages, automatically scheduling appointments when they register as sole traders or submit tax returns. Think of the difference even those changes could make.
We’d also like to see the implementation of an automatic opt-in model linked to the self-assessment tax return to increase pension contributions. And finally, but crucially – pension dashboards. We’d like to see policymakers develop dashboards tailored to the self-employed which will help them get a clear view of their retirement savings and have better management of contributions.
The reality of financial abuse in relationships
This week, I saw new research from Gina Miller’s organisation Moneyshe, stating that a third of women feel trapped in a relationship or situation due to a lack of financial independence. Their campaign is calling for women to invest to fight back against financial abuse, raising awareness of the gender investment gap in the UK and the importance of personal financial resilience and security.
I completely agree that helping more women build their own financial independence and resilience is vital. At Interactive Investor, we’ve done a lot of work on the various ‘gaps’ when it comes to women and their money. But, we must remember that financial abuse, a form of coercive control, is complex. Sadly, a staggering one in six women in the UK has experienced financial abuse in a relationship, according to the charity Surviving Economic Abuse. And though still not talked about enough, some very courageous female commentators in my industry have spoken about financial abuse in depth, and have outlined steps women can take to get help.
The Surviving Economic Abuse website has a range of useful resources, as well as helplines you can call if you or someone you know is in a financially abusive relationship. Just know that help is available.
Making your money work hard under inflation
Last week, inflation nudged back above the Bank of England’s two per cent target in October. Hitting 2.3 per cent, it was a sharp increase of 0.6 per cent, and with both services and core inflation speeding up last month, too, the prospect of a December interest rate cut is now looking faint. This is a crucial reminder of why you need to ensure your savings and investments work harder to grow in real terms. This means checking how much you’re earning on your savings, and shopping around for the best deals.
Remember, investing in the stock market gives you the potential to grow your money significantly faster than inflation and savings accounts, albeit with higher risk. So, it will always depend on your individual circumstances, but if you’re in it for the long term, your investments will have longer to recover if the market takes a dip. Plus, regular, monthly investments can also help smooth out the impact of stock market volatility on returns from investing.
And, we can’t talk about investing without talking about keeping an eye on fees. The good news is investment costs are one of the few things you can control. Investing will never be free, but it doesn’t have to be expensive either! Keeping your fees low can help your portfolio outpace inflation by a wider margin. Remember, percentage-based charges can eat into your wealth over time.
Quote of the week
“We still are not paid equally and if you believe that it’s a myth, do the math.”
Equal pay pioneer Lilly Ledbetter, in honour of Equal Pay Day last week
A recommendation
Four Thousand Weeks: Time and How to Use It by Oliver Burkeman.
This has been recommended to me so many times as a book ‘everyone has to read’ and I finally see why. It addresses serious themes without being serious – it’s actually pretty funny. If, like me, you’re sometimes tired of the relentlessness of the hyper productivity culture and the life that social media tells us we must live – you’ll really enjoy this and you’ll feel wiser once you’ve read it.
My pick of the podcasts
Off Menu with Ed Gamble and James Acaster
I have loved this podcast for years, but some of the recent episodes have been especially good – the most recent being with Derren Brown. It’ll have you laughing out loud on the tube, frantically noting down all the recommended London eats you want to try, and it’ll also have you wondering what your dream menu would be if you were on the podcast.