An organisation representing the UK’s self-employed workforce has called on government to reform the Lifetime ISA saving scheme to protect the future of the nation’s freelancers.
The call, from the Association of Independent Professionals and the Self Employed (IPSE), came in response to fresh findings from consumer watchdog Which? that revealed people aged 20 needed to set aside at least £131 each month to have a sufficiently comfortable retirement.
The study also claimed those waiting until aged 50 to begin saving would need to save £633 a month to retire comfortably.
Launched in April 2017 as an alternative to a pension scheme, the Lifetime ISA can be used as a retirement saving pot. Owner’s can deposit up to £4,000 each year, with a maximum annual interest return of £1,000.
The Lifetime ISA is only available to people under the age of 40, and cannot be accessed until the owner’s 60th birthday. All money taken out of the Lifetime ISA for retirement is tax free.
An official IPSE statement expressed the need to increase age eligibility of the Lifetime ISA to support older workers, and highlighted the government’s responsibility to providing an “auto-enrolment solution” for the self-employed to encourage pension savings.
“Saving for retirement is crucial for everyone, but putting money aside is particularly difficult if you’re self-employed,” said IPSE policy development manager Jordan Marshall.
“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 and equipment.”
According to IPSE research, 17 per cent of self-employed workers in Britain had no retirement savings whatsoever, while almost four in ten freelancers felt it was impossible to make any regular savings.
“Until the introduction of the Lifetime ISA earlier this month, there were insufficient financial products in place to encourage the self-employed to save,” Marshall added.
Further studies have suggested Britain’s self-employed are the among the least prepared for retirement in the world. Pension management firm Aegon suggested the UK lagged behind developed economies in Europe, Asia and the Americas. Only Japan had a lower proportion of self-employed savers.
A 2016 report published by Citizens Advice found that over half of self-employed workers were either concerned or very concerned about their post-retirement financial plans.
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