Recent research from Fidelity suggest that those who are self employed between the ages of 23 and 38 (millennials) are not saving enough for retirement.

Two in three young self-employed workers surveyed by the investment firm and pension provider said they had no pension savings whatsoever, with nearly three-quarters of those saying they can’t afford to put money away until they’re 55.

This is all a bit depressing.

But, as we are in the business of planning, we feel there is no point burying your head in the sand and hoping it will all go away or that you will receive an inheritance from a long-lost aunt. Given that the current State Pension (provided you have made 35 years National Insurance contributions) is around £8,500 per annum the thought of a lavish retirement on the State Pension alone is a nonstarter.

The Government wants us to take responsibility for our retirement and for those employed, have made workplace pensions mandatory. But if you are self employed you lose the additional 3% that your employer contributes so this means that you need to save more.

Our advice would be:

  1. Start thinking about this early, don’t put it on the back burner.
  2. If you are self employed you might need access to emergency cash more than someone who has the comfort of a salary each month – having a comfortable pot in cash should be your first goal.
  3. Think about what your wider financial goals are. Short term might be house deposit / wedding / new car but it’s important to consider the longer term too.
  4. Think backwards. In today’s money what will you need? When will you need it? An investment pot generating 4% per annum in retirement would require a pot of around £500,000 to give you an income of around £20,000.
  5. Work towards a date – if you are in a manual job, think practically – will I be able to climb ladders at age 65? If not, then perhaps look to an earlier Financial Independence Day.
  6. Use the different tax wrappers available where you actually get incentivised by the Government for saving. If for a first house – look at whether Lifetime ISAs would benefit you. For the longer term consider pensions – think of the tax relief.  If you are a basic rate tax payer, for every £8 of taxed income you pay in, HMRC tops this up by £2.  If you are a higher rate tax payer, then you can claim an additional £2 back via your tax return.

Get into the habit of saving. If your disposable income increases, consider saving more.  What you don’t have you don’t miss – move it out of your current account!  Prioritise.

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