Only one in three self-employed millennials have a pension

14 May, 2019

13 May 2019 Only one in three (34%) self-employed millennials, aged 23-38, currently have some form of pension saving, according to analysis from Fidelity International’s report ‘Generation Self-Employed’.

Being your own boss seems to be a compelling prospect for millennials in the workforce with three in ten (30%) saying they would like to work for themselves in the near future.

However, of those who are working for themselves, their finances do not seem to be in the strongest position as almost half (43%) of self-employed millennials do not feel they are saving enough for their future. Furthermore, one in four (26%) say they are struggling financially and another one quarter (24%) say they are not saving on a regular basis. Two thirds (66%) of self-employed millennials have no form of pension savings while three-quarters (74%) of self-employed millennials who are not saving for their future retirement say they simply cannot afford to.

Key reasons why self-employed millennials choose to work for themselves:

1 Freedom to choose where I work 94%
2 Starting their own business 86%
3 Earn a higher salary 82%

Fidelity International’s new report, Generation Self-Employed, explores how the self-employed are managing their personal finances and their attitudes towards saving and investing. It is clear to see the drive to earn a higher salary doesn’t equate with financial security. In fact, the report reveals 40% self-employed millennials have never heard of a Self-Invested Personal Pension (SIPP).

Emma-Lou Montgomery, associate director for Personal Investing at Fidelity International comments: “It is never too early to save for retirement, especially for the army of ambitious millennials who want to work for themselves. The beauty of youth – never more so than when it comes to saving and investing – is that time is firmly on your side. Every penny you put aside in your 20s (or younger) will grow into something worthwhile, thanks to the magical power of compounding. This is when the returns you make on your hard-earned cash start to generate their very own returns. All without you having to do anything more than stay invested.”

“Fidelity’s calculations show investing early while still in your 20s could leave you £60,000 better off in retirement and it shows just how crucial it is for investors to take advantage of compounding by beginning their investment journey earlier on in life.

Investing at the age of 28 vs 38

“If an investor starts investing at the age of 28, putting £2,000 in the stock market every year for 20 years, receiving an annual return of five per cent, at the age of 48, their investment is worth a little over £69,000. If they stopped contributing money at this point, this is when the magic of compounding is ignited. Their savings increase exponentially over the next few years thanks to interest, with the portfolio’s value climbing to £159,154 by the time they are ready to retire at 65.

“If on the other hand an investor waits until they turn 38 before starting to invest, their portfolio is also worth just over £69,000 by the time they stop investing, aged 58. However, the money is given less time to work, as they head towards retirement. By 65, their pot has grown to £97,706 – £61,448 less, despite both contributing the same amount of money for the same period of time.”

Emma-Lou Montgomery adds: “The example shows just how powerful compounding can be and how investing when you’re younger offers significant rewards. There is a perception that becoming an investor requires age and experience and it’s a myth. In fact, the lesson is this – the sooner you plant the seed of investment, the higher your investment tree should eventually grow.”