Self-employed expats need to look at the state of their pensions as a new report warns that many do not save enough for retirement.
The worry is that the self-employed – including expats – number nearly 5 million workers, which adds up to 15% of the national workforce but do not have to pay into a workplace pension like an employed worker.
The study reckons only 17% of the self-employed regularly save into a pension compared to half of employed workers. That drops to 13% for women.
Alan Lockey, author of the report for think-tank Demos, said: “The rise of self-employment is one of the biggest changes to the modern economy. We need a new deal to boost security for the self-employed, and by far the most urgent problem is dealing with a looming pensions and savings crisis.”
Tax on hiring contractors
The think-tank suggests an ‘engager tax’ paid by companies that take on the self-employed to save costs.
This tax, argues the report, would fund a retirement scheme for the self-employed, while workers should pay in at the same rate as if they were directly employed.
Demos accuses the government of bias towards business and of ignoring pension and welfare reforms that would help the self-employed.
The welfare reforms should include guidelines for universal credit qualification, higher maternity allowances and a paternity allowance.
Another concern is tax avoidance by companies encouraging workers to declare they are self-employed when they are really employees, which is becoming more prevalent under the gig economy.
Public policy playing catch-up
Demos asked around 1,000 self-employed workers about their experiences.
Most were happy with their work status (80%), but half feared their finances would suffer if they could not work due to sickness or injury. A similar number also voiced concerns about saving enough money for retirement.
The report, Free Radicals, revealed 70% of self-employed workers had no plans to find a full-time job.
“The steady rise of self-employment has been one of the most significant labour market trends of the past two decades. Public policy however, has yet to catch up with this extraordinary rise, leaving self-employed workers in desperate need of a new deal,” said Lockey.
