New research from Standard Life has found that the self-employed typically have pension provision of around one-third of the size of their employed counterparts.
That is not to say that the average employed person is in an enviable position when it comes to their retirement income planning. They are typically not.
Currently, the average pension savings of a self-employed 35-44 year old are £24,5001, with half having pension savings of less than £3,500.
In contrast, the average 35-44 year old employed worker has a pension fund of £73,000, with half having built up a fund of £20,000.
This gap becomes even wider when you take into consideration the self-employed not receiving a State Second Pension (S2P) when they reach State pension age. To simply fund this missing S2P income, an additional pension fund of £30,000 would be needed in today’s terms.
Whilst many self-employed people aim to rely on the value in their business to supplement their income in retirement or provide an opportunity to continue working in their old age, there are no guarantees with this strategy.
Creating a large enough fund for retirement income, using pensions and other investments to supplement the value in your business, places your long-term financial security alongside your business in terms of priorities.
