Many of our clients have lived and worked in a generation where ‘jobs for life’ meant that working lives were spent with only one or a very small number of employers.
Employers provided valuable benefits including death in service benefits and also retirement benefits which many of our retired clients are enjoying today.
But how can retired people share their experience to help children and grandchildren in their workplaces today?
The new way of working
In today’s UK economy, more people are self-employed or freelance. Since the millennium we have seen an increase from around 3.3 million to approximately 5 million people.
Freelancers or contractors often provide and deliver their services on a project basis and move from job to job. This means that they are effectively self-employed and will not benefit from auto-enrolment into a workplace pension or financial protection against ill health, incapacity and even death, that employers may provide for their employees.
If you, your children or grandchildren are one of the growing number of freelancers or contractors, the ‘gig economy’, do they have protection and retirement planning in place?
Playing your part
If you are fortunate enough to receive protection and retirement benefits from your employer, sharing your experiences and highlighting their value with freelance or contract workers can encourage them to seek financial advice to address these needs.
Despite widespread media coverage and greater financial awareness, many of the new ‘gig economy’ workers are not taking the time to consider their retirement planning and protection needs.
Even some company employees who have access to company auto-enrolment pension schemes are choosing to ‘opt-out’ – which in effect means they are declining additional financial rewards from their employer. If they opt-out they will not have to make the minimum scheme pension contributions, but this short term financial gain leaves them without a retirement plan.
Without any retirement planning in place, whether through a company pension scheme or through personal pension plans, State benefits are unlikely to provide the level of income needed to maintain expected standards of living.
Retirement planning does provide tax relief on personal pension contributions, making it a very tax efficient way to save. If a contractor does set up as a limited business, they can choose to make employer pension contributions which are treated as an allowable expense. This means that these contributions will reduce the company taxable profit and therefore reduces the Corporation Tax payable.
However, you cannot usually access these retirement funds until age 55 and this is due to increase to age 57 in 2028, when it will then be ten years before the State Pension Age.
Employers also often offer death in service or other protection benefits to employees. In 2017, there were 12.1 million members of group life cover, group income protection and group critical illness schemes which are provided by employers. But contractors or freelancers may need to take action to ensure that they have adequate protection plans in place for them and their family. The Association of British Insurers (ABI) analysis found that of the 26.6 million households in the UK, only 5.8 million had life assurance with just 0.3 million households having income protection policies.
With no protection plans in place, the individual and their family will be exposed to the risk of losing income in the event of ill health, incapacity or death which can destroy financial security. Protection plans give vital cover and reassurance to you and your family and it does not need to be expensive.
What we offer
We can offer an initial consultation at our expense and we can then discuss financial plans to help them towards their goals and also raise some financial needs which they may not have considered. If advice is required, we will charge for our advice services, but we will not proceed until we have agreed and explained the advice fees.
In any financial planning, we review individual circumstances and also make recommendations to suit personal budget and financial goals.
If you need to ask for advice, please contact your Origen adviser. If a friend or family member could benefit from advice in this area, please ask them to contact your Origen adviser or call us on 0334 209 3925.
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