Contractors focus on cash savings at the expense of pensions
Contractors, freelancers and small business owners are focused on building up cash savings but that is hitting retirement savings, new research from Workwell shows.
The study by Workwell and IPSE found three out of four (75%) save regularly into cash accounts but just over half (51%) put money into their pension each month.
However nearly half (47%) of the contractors, freelancers and people owning their own businesses questioned are debt-free and have cleared any mortgages, credit cards or loans. Around a third (33%) of those questioned owe less than £100,000 in total, the research shows.
Workwell, a leading provider of services to flexible workers and recruiters in the UK and overseas, collaborated with IPSE, a community of over 35,000 self-employed people. It found around two out of five (39%) of contractors, freelancers and small business owners save regularly into ISAs while around 34% regularly put money into other financial services products such as investments.
Among those who do invest in pensions the average monthly contribution is around £218 compared with £215 a month going into cash accounts, £237 into ISAs and £184 into other financial services products.
Chris Mollan, head of accountancy services at Workwell said: “With interest rates rising rapidly in the UK it makes sense for contractors, freelancers and small business owners to focus on cash accounts and they may also need a cash buffer to ensure their business can continue to operate.
“Ignoring other savings and particularly retirement savings however does come at a price and there are potentially tax benefits to be gained by making contributions into retirement savings via companies as well as tax benefits from other investments.
“Running a business and doing the work is often challenging enough for contractors, freelancers and small business owners and many would benefit from expert support on tax efficiency.”