Taking Charge of Your Retirement: Time to Act – By Alan Donegan.

By co-founder of the award-winning Rebel Business School, Rebel Finance School and the Rebel Entrepreneur podcast, Alan Donegan.

The Looming Crisis: Self-Employed Retirement​

You might be thinking “Not another crisis?!  We’ve had the Ukraine war, Covid and the cost of living crisis. I don’t want to think about another crisis!” Maybe personally you’ve had a mid-life existential crisis to add to the mix! And now I’m telling you we have another crisis on our hands? What on earth could it be now?
Well, this is a crisis that you won’t feel for years until you come to retirement age and find out you don’t have enough to live. According to government stats, 81% of self-employed people in the UK are not contributing to a pension. To put this in context, only 20% of employed people are not contributing to a pension. 81% of self-employed people are sleep walking towards a retirement in poverty. 

Challenges of Being Self-Employed

magine the scenario.  You have just become self-employed.  You are so excited building your business, bringing in those first few sales, making money.  You work every day to expand the business and make sales.  At this stage it is just you so you do the accounts, run marketing campaigns, make sales, deliver products and services and do the customer support. 

Is It Possible to Become Financially Independent? We Did It and Know Lots of People Who Have?

Do you think most people in their first year or two in business have space to think about setting up their ownpensionOr are they just trying to bring in sales and keep their heads above water? 

The Grim Reality of Retirement Poverty

Your business grows, you start thinking about staff and expanding.  You are so excited.  You have created a gap between your spending and your sales and you have money to expand.  Then you find you have to set up a pension scheme if you hire a few people. A pension scheme?  Are the government crazy?  You haven’t even got a pension you are just trying to build a business.  You can sort that out later. 

Simple Solutions for Self-Employed Retirement

And on and on the story goes.  Where is your pension, your SIPP (self-invested personal pension) on your list?

Is it above making sales this month?  Is it above customer service and unhappy customers?  Is it above doing the actual work to be able to afford food?

Steps Towards a Secure Retirement

SIPP and pension isn’t even on the list for most self-employed people.  This is clearly shown by the data that shows 81% of them don’t have any form of pension. 

The Role of Education in Self-Employed Financial Well-being

Play this out.  You work hard as self-employed, you make money, you look after your family and you work and work and work.  You are heading towards retirement age and you start to think it would be nice to stop, look after the grandkids, travel a little.  But how are you going to fund this?

Spreading Awareness: Averting the Self-Employed Pension Crisis

The state pension is barely enough for the basics. The current state pension is £203 a week.  Below an income of £236 a week you are considered to be in poverty. 

If you’re relying solely on the state pension you are going to be in a pickle and not the nice gherkin kind.

If you don’t save for your pension you will be in poverty by the time you reach retirement.

I used the C word at the beginning of the article.  Crisis.  It gets over used at times but for me this is a Crisis with a massive capital C.  A slow moving march towards retirement poverty for the self-employed of the UK.  The hard workers, the entrepreneurs, the business people that make up so much of our economy.  If nothing is done now millions of self-employed people will be left in poverty in retirement after a hard and long career. 

The Solution to the Crisis: Self-Employed Retirement Planning

​The answer is quite simple and I’ve set it out below. As you read the points you might be thinking “this is not simple at all Donegans! What are you going on about?!” If you’ve never looked at your finances this might seem overwhelming. Read on to the end of the article for some resources we’ve built for you to get you going.

  • Build an emergency fund to protect you from emergencies such as changes in income, the car breaking down or time off due to illness.
  • Open a SIPP with a provider like Vanguard.
  • Take 10% or more of your profits and invest them within your SIPP into a broad based global index fund like the Vanguard FTSE Developed World ex UK.
  • Leave it to grow as you work over the years.
  • Live off 4% of the pot in retirement.

The solution to the crisis is simple. Why don’t we do it?

We don’t make enough in our businesses.  We want to spend the money now.  We think personal finance is too complex.  Pensions seem scary and confusing.  There are a million excuses as to why we aren’t saving for our retirement. 
If you don’t want to end up in poverty in retirement then you need to look after yourself. There is no knight in shining white armour coming to save you.  The government aren’t going to bail you out, they are already looking at ways of getting out of the costs of the state pension. 

You have to do it yourself.

You might be asking “how?”.  Good question.  We want to help you!  The Rebel School (the business I launched 11 years ago with my business partner Simon) has helped tens of thousands of people to go self-employed, follow their dreams of building a business and making their own money.  Now we want to make sure these same people don’t end up in poverty in retirement. 

Actional steps:

There are so many tools available to you. All you need to do is take the time to understand them and use them to create a bright financial future for yourself. 

Please help us avert the self-employed pension crisis. Please share this article with every single self-employed person, small business owner you know. Don’t do it for us, do it for them. Help them to have a bright financial future. 

81% of self-employed people don’t have a pension. Eight in ten of them are heading towards poverty in retirement. We need to do something about this. 

Please share as widely as possible. Let’s end the crisis before it becomes a HUGE problem. 

Additional materials for study:

Alan Donegan

Alan is co-founder of the award-winning Rebel Business School, Rebel Finance School and the Rebel Entrepreneur podcast. He became financial independent at 40 years old and now uses his time to help people from all walks of life to start their own businesses, take control of their finances and avoid debt.
Find out more about Alan on his website.