With greater flexibility in employment than ever before, the way in which people work has significantly changed in recent years. Self-employment in particular has seen a marked increase worldwide and not least in the UK; in March 2019 self-employment in the UK reached a record high of 4.93 million according to the ONS.
There’s no doubt that self-employment offers many benefits; the opportunity to drive your own career path as well as the option of working flexibly, something which is particularly useful with a young family or other family commitments such as caring for elderly relatives. Unsurprisingly – although somewhat traditionally – this type of care continues to mainly fall to women. As a result of this many women opt for self-employment, particularly at the point at which they return to work after maternity leave or following a period of part-time work when raising young children.
Yet for women, the outcome of a career break or time self-employed quite often leads to a more long-term issue – a significant pension gap.
This pension gap can arise through a number of circumstances, but it most likely happens because contributions lapse due to that career break, drop during any part-time employment and reduce or disappear completely if women opt for self-employment, particularly if there are issues managing cash flow as is common for those running their own businesses. The situation can be exacerbated when childcare costs erode earnings. And added to this, for the self-employed, is the removal of access to an employer pension scheme with top-up contributions.
Life events can take their toll on your pension and tax planning, and it can be concerning to feel that the opportunity to plan for retirement is slipping away. We can help. For more information about pension planning, whatever your circumstances, please get in touch.
Claire Wedlock, Pension Specialist firstname.lastname@example.org