How can we get Millennial freelancers to save more for their later lives?
- 22 Aug 2019
For some years, freelancers have neglected to save for their later lives – the years where they begin to wind down their careers or just feel like stopping work altogether. Research ComRes undertook for IPSE found only 31 per cent of freelancers are currently saving into a pension for their retirement, which is by far and above the most common way to do so. This is concerning for freelancers, the government, pensions providers and, of course, organisations like IPSE who represent the self-employed for a host of reasons.
Of most concern is the potential for this situation to lead to a self-employed pensions crisis in the future, particularly if there is an assumption that people can tide themselves over in retirement with the state pension, one of the least generous in Western Europe.
Whilst over 40 per cent of freelancers are aged between 50 to 65, and have a much more pressing need to address their savings for later life, there is a rising group who have a greater lead-in time to make a difference now: Millennials.
Born between 1981-1995, this section of the freelance workforce is growing at a rapid pace. In the 16-29 age bracket alone there has been a significant rise of almost 45 per cent, up from 141,000 in 2008 to 204,000 in 2018. In our research we found that Millennials were at particular risk of not saving for their later lives. Much of this is down to a lack of flexible savings options on the part of pensions providers, who tend to offer pensions with strict rules that do not account for the facts of freelance life, like fluctuating incomes and time between contracts. We also found that the jargon contained in T&Cs for pensions policies was also a factor in putting off freelancers of all stripes from saving.
There are a series of recommendations both pensions providers and government can take in the short-medium term to encourage more Millennial freelancers to start saving for their later lives. IPSE has long called for the sidecar pension to be rolled out. No, that’s not an addition to a motorbike we are calling for, but a smart pension that allows people to save into both a pension and a ‘rainy day fund’ they can draw down on in times of emergency, penalty free. We also want to see the Government’s Money and Pension Service cut through the jargon and provide more tailored guidance for freelancers so that they can feel equipped to make a decision about their savings with confidence.
In the meantime, making sure Millennial freelancers, and indeed the self-employed of all ages, are well prepared for the future is a top priority for IPSE. In the coming months we will be doing further work in this area – so watch this space.
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