Investments  

How to help the self-employed save more

This article is part of
Guide to advising the self-employed

"They will experience people paying them late or not paying them at all and there will be periods where they may not be able to work through sickness or injury or even times where they can’t get work because of the markets dropping.

"It’s vitally important that they do save, yet, of course, we are totally sympathetic to the causes of why they don’t."

Regulatory restrictions

Mr Conner believes some of the latest policy decisions have hindered, rather than helped the self-employed professional to save. 

He explains: "Recent legislation changes haven't helped the self-employed at all. They've been left out of auto-enrolment and, post the Retail Distribution Review, they have to pay upfront fees to an adviser to set-up a pension for them.

"If someone can only afford to put away say, £100 per month, then it's highly unlikely they'd be willing to pay £500 upfront for advice.

"Without an adviser 'selling' the benefits of saving and arranging the policy for them, many self-employed people will never get started, or get started way too late."

Indeed, the 2017 Drewberry research also showed even ready savings in cash were lacking among two-fifths of the population (see Figure 1: Cash savings levels).

Figure 1: Cash savings levels in the UK

According to Mr Conner, the current post-RDR charging method needs to be revisited for new accumulation products - otherwise, as he states, it "just puts lower income people off getting advice and reduces their likelihood of saving".

Lack of information

Steve Andrews, head of managed services at Focus Solutions, believes one of the challenges is the lack of clear and easily accessible information about savings products that speak to the specific needs and considerations of the self-employed. 

He says: "The self-employed have a variety of different needs and considerations to the employed, which often need more ongoing attention due to changing circumstances.

"They have no sick pay, no forced pension provision (employer pension scheme) and they could have periods of fluctuating levels of turnover, unlike the employed where the income is a constant.

"Unfortunately they still have the same bills as the employed. They are likely to have a mortgage, run their business, pay their taxes and live their life."

Technology can help

The rise of apps, cashflow modelling, financial 'chatbots' and online investment planning calculators, as well as the rise of open banking can make a huge difference to individuals seeking to monitor income and expenditure daily, and help consumers take better control of their day-to-day finances.

This is the view of F&TRC's Mr Higgs, who says: "There are a number of propositions currently available in the market such as Plum, Cleo and OvalMoney that are able to monitor a client’s income and expenditure through banking aggregation in order to identify times when they can save money affordably."