The Association of Independent Professionals (IPSE) have called on the government to look at improving the Lifetime ISA (LISA) provision for those in self-employment.
The survey found that individuals needed to generate savings of £131 per month, from the age of 20, to secure a comfortable retirement pot.
On average, household income must equate to £26,000 per year to cover household essentials - such as food, utilities, transport and housing costs – and a European holiday and leisure activities. To generate such an annual income, a couple would require a defined contribution pot of £210,000, alongside existing state pension entitlements.
With saving being a common issue for contractors, the data did show that almost one in five (17%) have no retirement savings at all. The recently launched LISA has steep penalties for withdrawing early, which may discourage many from saving in the first place. IPSE wants the Government to review the LISA at the earliest possibility to incentivise more self-employed people to save.
Jordan Marshall, IPSE Policy Development Manager, said, “Saving for retirement is crucial for everyone, but putting money aside is particularly difficult if you’re self-employed. Your income is volatile, and you need to have a buffer to offset periods when business is quiet or for other business costs such as accountancy, marketing & equipment.
“IPSE research found that 17% had no retirement savings at all. In addition, 37% of freelancers were unable to contribute towards a pension fund while 9% are unsure how to save for retirement.
“Until the introduction of the LISA, earlier this month there were insufficient financial products in place to encourage the self-employed to save. To improve the worrying statistics, the Government must increase the age eligibility for the LISA - at present it is only available to those under 40 - to support older self-employed people and encourage them to save. An auto-enrolment solution for the self-employed also needs to be developed to encourage greater pension uptake.”