LEBC has urged politicians to address the issue of retirement poverty among the self-employed, as research shows that the majority have no pension.
In a letter to the main political parties, entitled ‘How to end retirement poverty for the self-employed,’ Jack McVitie, chief executive of LEBC, has called for the advice allowance to be extended to the self-employed and the restoration of carry back relief.
Employers can currently spend up to £500 per year on financial advice per employee as a tax-free benefit. According to LEBC, self-employed workers are often wary of locking away savings for the long-term due to the uncertain nature of their earnings. Extending the allowance to also cover the self-employed would enable them to build safeguards into their lives and provide financial resilience to enable them to save for retirement, McVitie said.
In addition, reintroducing the carry back of pension savings tax relief would also ease the burden upon the self-employed. Until 2006, pension savings could be made after the end of the tax year, but carried back for tax relief purposes to the previous tax year, which was particularly helpful for the self-employed who may not know their final profits until some time after the end of the tax year.
McVitie said: “The 4.8 million self-employed in the UK are the least well prepared for retirement. Research shows that in June 2018, 69% of the self-employed had no pension. This contrasts starkly with employees, 10 million of whom have benefitted from auto enrolment.
“The DWP has explored extending auto enrolment to the self-employed via self-assessment, but research shows this is not a popular solution for the self-employed, who feel that their income is too uncertain to commit to an automatic savings deduction. Based on our experience we believe the self-employed poverty trap could be addressed by adopting some simple measures to make it easier for the self-employed to improve their financial resilience within a flexible framework.”
