Many self-employed workers and small businesses lack adequate savings, according to research.
In a survey of 1,174 adults conducted by Aldermore, 22% of self-employed workers said they have no business savings at all, while 40% have less than £1,000 in savings.
This leaves many sole traders unprepared for unexpected circumstances, potentially placing them at risk of financial hardship.
Over half (54%) of respondents said they had been unable to earn money during unforeseen events, such as periods of ill health.
Of these businesses, 48% had to stay off work for more than 1 month, and 22% for over 4 months.
Aldermore estimates that this typically costs businesses around £4,000 in lost revenue.
Ewan Edwards, head of savings at Aldermore, said:
“While many self-employed people relish greater flexibility and control, the first few years can often bring long hours, additional stress and relatively small financial rewards.
Quite often, issues that can affect the ability to earn, such as ill-health or childcare mean that many businesses are failing to prepare financially.
We want to work with the government to look at means of backing Britain’s entrepreneurs.”
A survey by RSA compared concerns of self-employed people between 2017 and 2019. In 2017, 19% claimed their income varied month to month which meant they sometimes have trouble meeting basic living costs. In 2019, 24% of people felt this was true.
26% of self-employed workers felt their word didn’t provide them with enough money to maintain a decent standard of living in 2017. In 2019, this number had increased to 30%.
40% of self-employed workers said they didn’t expect to have enough in private pensions and other savings to maintain a decent standard of living in retirement. In 2019 this number had increased to 45%
A study from Drewberry, a London based insurance brokerage, found that 73% of self-employed people don’t have a private pension and the 51% of those who do either don’t know how much they have saved already or don’t know how much they should be contributing.
Only one in ten self-employed people contribute over 10%, putting the great majority at risk as the Scottish Widow recommended minimum is 12%.
Lack of preparation for coronavirus crisis
Since the coronavirus pandemic, an estimated 3 million self-employed workers have missed out on the government’s support package and grant due to being ruled ineligible. These are down to rules such as those who have made profits of more than £50,000 in the previous 3 years illegible.
Despite this, a couple earning a combined £45,000 could access the grant of up to £7,500 each whilst an individual earning £50,000 could not. This is proving difficult for many families who have one main breadwinner who’s income they rely on.
At Ryans, we understand the difficulties and stress that comes with economic uncertainty. We can help you manage your finances and make a plan for your future savings.
Talk to us about your business savings.