30 October 2006
The Department for Work and Pensions has published the findings
of research into self-employment and retirement.
The research was carried out by independent researchers and
aimed to increase understanding of how self-employed people plan
financially for their retirement, how they make decisions about
retirement and about how self-employment can play a part in
extending people's working lives.
Key findings from the research show that:
- The experience of self-employment was extremely varied. Some
self-employed people in the sample were faring well in successful
businesses while others were struggling to make a living.
- Experiences of self-employment were reflected in people's
pension provision. Some had been in occupational pension schemes
that would form part of their income in retirement. Others were
relying on personal pensions, some of which were expected to
provide a relatively low income. Some people expected the State
Pension to be their main source of income.
- Knowledge of pensions was very patchy. The general picture was
of low levels of knowledge of state pensions, personal pensions and
other financial products. There was very little understanding of
the tax relief available on pension contributions.
Apart from some people approaching or beyond State Pension age,
many viewed personal pensions negatively. Some expressed strong
disillusionment in personal pensions.
- Views about occupational pensions were largely positive. People
particularly liked the automatic deduction of contributions that
had been their experience with such schemes.
- There was a widespread faith in "bricks and mortar" as a safe
way of investing money. Financial products such as Individual
Savings Accounts, building society accounts and stocks and shares
were not seen as major sources of income after retirement.
- Sources of information and advice on pensions and financial
products varied, but impartiality and trust were key issues for the
people in the study. Accountants were often seen as trusted sources
of financial advice by self-employed people, although they were not
seen as a source of advice on savings and pensions.
- People in the sample generally wanted more information about
pensions, but few were able to say specifically what information
they would like. Some suggestions, such as pension forecasts and
tracing old pensions, are already available.
- Decisions about working beyond State Pension age were linked to
people's financial position, and the satisfaction they derived from
work. For some the notion of a retirement age was not salient.
- Flexibility was important in decisions about extending working
life, particularly for professionals. However, for others
self-employment offered no flexibility and meant a loss of earnings
and increased financial insecurity.
