As the ‘on demand’ economy kicks in and more people become self-employed, we might be forgiven for thinking that now is a golden age for those people who work for themselves.
However, new research shows this is anything but true.
Lower earnings
The Resolution Foundation has revealed that average earnings amongst self-employed workers are lower than they were in the mid 1990s.
Their research has found that the number of self-employed workers has risen by 45% since 2001 / 2002 but their average weekly earnings has fallen by £60; equivalent to over £3,000 per year.
The average income for a self-employed worker in 2015 / 2015, the latest period for which data is available, was £240 per week, down from £300 in 1994 / 1995.
The think tank blamed the increased number of low paid self-employed positions, which have become available due to the ‘on demand’ economy. Whilst the poor economic climate has also been a contributory factor.
Lower savings rates
As a consequence of lower average earnings, new research shows that self-employed workers are now able to save less than their employed peers.
According to Scottish Widows, only 43% of self-employed workers are currently able to save adequately. In contrast, 56% of employed workers are able to save sufficiently.
The report found additional consequences of self employment, particularly in relation to retirement.
Over the past few years millions of workers have been automatically enrolled into a workplace pension. Whilst the contribution levels initially start lower than is sufficient to provide an adequate retirement income, they will rise and of course something is better than nothing. But, self-employed workers will not have the same opportunity and naturally do not have an employer, who will also make contributions on their behalf.
However, despite this handicap, the research reveals that many self-employed workers recognise the issue, with 51% willing to pay for pension advice. Even larger numbers, 73%, are prepared to take guidance from adviser and a range of financial matters.
Self-employed challenges
Working for yourself can bring great rewards. The satisfaction of building a business, greater flexibility and the chance to be more in control are just three which come immediately to mind.
However, there are significant downsides too.
Paid holiday and sick pay are perks the self-employed can only dream of.
As we’ve already said, the self-employed also need to make their own provision for retirement, with no workplace pensions or employer contributions available to make this task easier.
Of course, self-employed workers can make their own retirement provision and take out insurance to help mitigate the effects of illness. However, doing so will be far harder if the decline in earnings continues.
We are here to help
If you are self-employed and would like advice; including options on planning for retirement we are here to help.
Call Sarah or Bev on 0115 933 8433 or email info@investmentsense.co.uk
