27% of people approaching retirement admit they need help understanding their income options
23% have no idea how much tax they will need to pay on their pension
These figures come from a new survey of workers aged 50+ by WEALTH at work, provider of financial education and guidance in the workplace. Self-employed people weren’t included in the survey, but had they been it’s likely that without in-work guidance the figures would have been higher.
14th – 18th September 2021 is Pension Awareness Week and while there will be all sorts of awareness raising events going on for employees, who gets the word out to the rest of the workforce?
Small business owners and self-employed people are less likely to save for retirement. A 2015 report by the Resolution Foundation concluded that as few as 27% of self-employed individuals were putting money into a pension, down from 33% only a few years earlier. This compared to more than50% of employees. This is backed up by statistics from the Wealth and Assets Survey which shows that only 23% of self-employed people intend to rely on a personal pension in retirement. A further 23% expect to rely on the state pension, 12% on personal savings and investments and only 6% on the proceeds from selling their business. Covid-19 is likely to have changed those figures for the worse as people struggled to keep businesses afloat and all non-essential spending was cut.
There is a danger that reliance on the state pension may lead to financial exclusion and poverty in retirement. The current pension landscape is complicated. Small business owners aren’t aware of the level of the state pension support they can expect in retirement and there is a lack of engagement with retirement planning.
There are options such as personal pensions and lifetime ISA’s but we need to look for a sustainable long-term solution, ways of providing adequate advice and of engaging small businesses and the self-employed to generate a step change in the way that they save for their future.
Let’s face it, when you start a business, money has to cover so many necessities that pensions are far from the top of the list. Once you have to provide access to a pension to employees, you do become more aware of your own retirement needs too but that could be a long way down the road. Even then complexity and time mean many business owners neglect their own retirement planning or assume they’ll be able to sell the business for enough to keep them in retirement. Don’t neglect your own wealth and wellbeing post 66.