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The world of self-employment has so many perks. I am writing this in Norfolk where I have enjoyed the summer holidays by the sea. 

I couldn’t have done this when I was employed, and I am so thankful. 

However, whilst the benefits of self employment are numerous, there are also some notable disadvantages when compared to the perks and stability afforded by being on the corporate payroll. 

Navigating the world of personal finance certainly isn’t always easy when you work for yourself. This is why I am thrilled to be collaborating on this article with Fidelity, discussing their fascinating report into ‘Generation Self-Employed’ and how the findings resonate with my own experience of working for myself. 

I come from a family of business owners. Yet, instead of the entrepreneurial path, after university I opted to enter the corporate world, training with a Big 4 Accountancy firm. A steady employed job, with all the perks including private healthcare, a company pension scheme with generous company contributions, and a healthy, consistent paycheck.  

However, once I had children, I wanted something else. 

Like many others who choose self-employment, particularly women, I wanted the freedom to work around my children. A freedom of my own making. 

For me, this outweighed everything else.

Since joining the ranks of the self-employed, I have found an incredible tribe of people just like me. Many of them have become great friends as we support each other to make our choice work. The results of the ‘Generation Self-Employed’ survey really resonated with me as they embody so many of our choices: 

• A huge 95% of respondents stated managing your own work-life balance was a key factor in becoming self-employed. Never having to miss a sports day at school, working hours that suit (and vary at whim), or simply being able to take the day off at the drop of a hat without having to submit a holiday request is a wonderful thing. 
• 90% desire the freedom to work where they choose. I have had business catch ups with my self employed friends on the beach here in Norfolk, at the spa and walking in the woods. On sunny days, I work by the pool at my gym and I regular mix up where I work to suit my wider family commitments. The beauty is that if I have my phone with me, I can work from anywhere in the world. 
• 80% cite one of the key motivating factors for self employment to be a desire to start their own business. I spent time in Dublin earlier this year at the Facebook Gather event alongside some amazing people who had set up incredible businesses from a dog hotel to eco friendly glitter. Without entrepreneurial types, we wouldn’t have some of the amazing brands we know and love out there to enjoy.  
• 65% are looking to earn a higher wage than in employment. Your earning capacity is unlimited when you work for yourself. There are no salary reviews, no grade pay caps and no performance appraisals. Just a world waiting for you to crack it. 

But how does the financial reality stack up with the wider dream?

Financial Challenges Of The Self-Employed

In the early days of self employment, building your new business is the priority. There are new skills to learn, networks to forge and importantly, money to bring in through sales. Very few people prioritise things like getting a pension set up or finding out how to continue to contribute to a previous employer pension, if they have one and it allows.

This lack of focus on all things personal finance often has a tendency to continue. After all, once business is on the up, there are always other things to think about.  

I predominantly work with women and a significant proportion of them are self employed. There is a recurring theme to our discussions, and the wider conversations I have within my entrepreneurial network. 

Their lack of attention to, and often understanding of, financial planning. 

I spoke with one lady at an event recently and after we had been talking for a while about our work, I asked if she had a pension. She looked at me, paused, and said ‘I was about to lie to you then and say yes because I am ashamed to say I don’t. But you are too nice to lie to’.

I know she won’t mind me recounting this story as she then later publicly announced her intention to set up a pension to our networking group. 

That post on Facebook – in which she said she was going to set a pension up after talking with me – started a thread in which other women also spoke up to say that they didn’t have a pension either. Many said they had just never got round to it. Others simply didn’t know how to, so had avoided ever doing it. Others still believed they didn’t earn enough to warrant having one. 

This is why I love doing what I do; breaking down those taboos around money and getting people talking. When we talk, we learn and when we feel knowledgeable, we take action!

The results of the ‘Generation Self-Employed’ survey show that 62% of self-employed people have no form of pension savings. 

This is a shocking statistic. It’s a statistic I am working on bringing down, conversation by conversation. 

But it’s not as simple as ‘just set one up and get paying in to it’. How do you begin to navigate the minefield that is the world of financial products? According to Fidelity’s report, 39% of self-employed people have not heard of a SIPP (Self-Invested Personal Pension). 

Let’s face it – the name doesn’t draw you in, does it? ‘Self-invested’ screams of needing to have a degree of knowledge of investing and how to do it, doesn’t it.

I have to admit that as someone who had always had a workplace pension, when I became self-employed, I didn’t have a good knowledge of SIPPs and how they worked either. I was aware they existed, but how they differed from stakeholder pensions and workplace pensions (aside from the obvious that I no longer had an employer!) – I was clueless. 

What is clear is that even though people may be fully aware that they aren’t saving enough for their future, there is a significant proportion of the self-employed population who simply don’t know what to look for (including the 39% mentioned above) or who do have limited knowledge, but get bamboozled by the financial jargon in to inaction. I speak to lots of this second group of people.   

Surely there is a better way of getting these people saving?

Let’s Make It Easier For Generation Self-Employed

Auto-enrollment has changed the landscape for employees. It is compulsory for employers to offer eligible workers a workplace pension. Every employee who earns at least £10,000 with their employer is automatically enrolled into the pension scheme, which requires a minimum contribution to be made every month. This contribution is made up of contributions (currently totalling 8%) from both the employee and employer, plus tax relief. 

By auto-enrolling workers, and making opting out the bit that requires action, there are thousands of employed folk who now have a pension who would never have opted in if left to their own devices. It’s a huge step in the right direction, albeit I think contribution percentages need to be increased considerably. But that’s a discussion for another day….

The self-employed would benefit hugely from a comparable scheme. 

Indeed, 49% of respondents in the Fidelity report said they would welcome government regulations that automatically enrolled them in a scheme to save for their future. 

I’m surprised this figure is so low; I would most definitely welcome this. 

At a time where digital advances and modern technology are making it increasingly easy for people to work for themselves, a little help with this would go a long way. The government can’t be expected to support us all until we live to 100 but if we aren’t encouraged to save for later life by making it simple and easy to do, there will be an old age crisis looming for the rising self-employed population.

I truly hope something will be introduced in the near future but in the meantime, it’s up to us to take action for ourselves.   

Self-employment and Saving

I understand the dilemma of deciding how much and where to save when you don’t have a guaranteed income. When you don’t feel you are earning enough to divert it away from the here and now for ‘the future’, whatever that holds…

Especially when you are first starting out on the journey of working for yourself and need cash to invest in your business. 

I have been there myself. 

When you are employed, with a regular, known monthly income, deciding how much of your salary to contribute to your pension means committing a fixed percentage of your earnings to your future.

But variable income is often the norm for many who are their own boss. Heap on the worry of what would happen if you lost a client or two, cash flow issues caused by unpaid invoices and slow paying clients, taking a holiday (we don’t get 25 days a year paid holiday!), any upcoming investment needs and there are suddenly several layers of complexity when thinking about saving. 

I can understand why the largest proportion of respondents in the Fidelity survey save with an ISA (39%). Funds deposited in an ISA can be taken out again if required (with the exception of a Lifetime ISA which has withdrawal restrictions). 

With a pension, the money you commit to it is locked away until the age of 55 (rising to 58 in 2027 and likely again before I reach 58!)

I have a healthy Fidelity Stocks and Shares ISA. I haven’t always been so devoted to my pension. When I was caring for my children when they were young and had no income of my own, I didn’t pay in to a pension at all. I bitterly regret this decision now when I crunch the numbers and ponder what that gap in contributions equates to for my future self. But hindsight is a wonderful thing.

Even when I first started out working for myself, it took me a while to consolidate my pensions from previous employers and streamline my admin so that it was easy for me to make monthly pension contributions.

Now, I do both; with monthly direct debits for both my pension and my Stocks and Shares ISA. Does my variable income worry me? Well a little, but these direct debits give me the kick up the bum to make a success of what I do as they mean I have fixed targets I have to hit!

Get Empowered

If you’ve read this and are thinking ‘I need to get this sorted once and for all’, go ahead and read the Generation Self-Employed report and think about the simple checklist at the end, summarised below:

1. Consider opening a Self-Invested Personal Pension (SIPP)* for your longer term financial future
2. Consider investing if you have money you don’t need to access for at least 3 years (and preferably more than 5 years) : a great place to start is a Stocks and Shares ISA** as all the gains are free from tax
3. Make a savings plan : if you would like a free 20 minute call to see if working with a financial coach and mentor to help with this is for you, book some time with me here. 

(I’d personally say that making a plan should be number 1 on this list. Once you have clarity over your short, medium and long term goals and start to put some flesh around them, you can then work backwards to today. A solid, well thought out plan makes the choices over how much to put away, and where to save and where to invest that much clearer. And clarity is the precursor to action). 

* Fidelity offers a SIPP where you can make payments from as little as £40 a month. See their website for more details. 

** You can open a Fidelity Stocks and Shares ISA with regular payments from as little as £50 a month. See their website for more details.