New Research: Small Business Owners Prioritize Cash Savings Over Retirement Funds

Recent survey by Workwell and IPSE reveals that 51% of self-employed individuals are prioritizing cash savings over contributing to their pensions. Learn more about the retirement savings habits of small business owners.

Small business owners are prioritizing cash savings over their retirement funds, as revealed by recent research. While salaried employees benefit from auto-enrolment, self-employed individuals are responsible for setting up and contributing to their own retirement pots. However, a survey conducted by Workwell and the Association of Independent Professionals and the Self-Employed (IPSE) found that only 51% of self-employed individuals are actively contributing to their pensions, with three in four opting to save regularly into cash accounts instead.

A 2023 survey by Interactive Investor suggests that the number of self-employed workers not paying into a pension could be even higher, with as many as three in four individuals neglecting their retirement savings. Despite the lack of substantial pension funds, nearly half of the self-employed individuals surveyed were debt-free, having cleared mortgages, credit cards, and loans. Additionally, around a third owed less than £100,000 in total.

For those who do invest in pensions, the average monthly contribution stands at approximately £218, slightly higher than the £215 going into cash accounts, £237 into Isas, and £184 into other investment products. While automatic enrolment may not be applicable to the self-employed, there are compelling reasons to prioritize pension contributions. It's never too late to start saving for retirement, even for those who have previously overlooked this aspect due to the all-consuming nature of self-employment.

Being self-employed often demands undivided attention, making it challenging to prioritize long-term financial planning. However, neglecting pension savings can have long-term repercussions. It's crucial for self-employed individuals to recognize the importance of investing in a pension and to take proactive steps to start saving for their retirement.

For those who may have put off thinking about their pension, it's essential to understand the significance of initiating pension contributions and to gain insight into the process of doing so.

While self-employment may present unique challenges, prioritizing pension contributions is crucial for long-term financial security. It's never too late to start saving for retirement, and taking proactive steps to invest in a pension can yield significant benefits in the future.