Are you living in ‘La-la Land’ when it comes to your future?

Los Angeles

Are you too focused on the ‘now’ to think about your financial future?

The award for the most heavily-hyped film of the year definitely goes to ‘La La Land’. It’s a bittersweet tale of two ambitious and talented individuals, Sebastian and Mia, who give up their day jobs and dream of making it big.

(Spoiler Alert!)

In the end, Sebastian and Mia both end up living the lives they wanted for themselves, but here in the real world, there’s no guarantee of a happy ending. If you’re too busy turning your present-day dreams into reality, you might be tempted to put off thinking about longer term planning. You could be in for a real shock when you retire.

Could the personal sacrifices they make along the way resonate with a number of the 4.6 million self-employed people working in the UK today?

The downsides to being self-employed

The UK today has a historically high level of self-employed workers, who now make up 15% of the total workforce. While being self-employed means gaining a more flexible working life, being your own boss means missing out on a number of benefits that employees often take for granted. For example:

  • You could have an irregular income, which makes saving on a regular basis much more difficult.
  • You don't have an employer paying into a pension on your behalf, and you're missing out on helpful government-sponsored initiatives such as auto-enrolment that make planning for retirement much less complicated.
  • You also don’t get to enjoy other valuable benefits available to many employees, such as paid sick leave and holiday entitlement, private health insurance and also life and disability insurance.

In contrast, if you’re self-employed, you’re required to take more of a ‘do-it-yourself' approach to life, and because life has a habit of throwing up the unexpected from time to time, there’s a chance that some important aspects of long-term financial planning will get overlooked.

Attitudes of self-employed workers in the UK

Aegon conducted a global survey of self-employed individuals, surveying some 17,600 respondents from 15 countries, across the Americas, Europe, Asia and Australia. For the self-employed community here in the UK, some of the key survey findings raised alarm bells. For example, when it came to pension planning, Aegon’s findings showed that a staggering 75% of the UK’s self-employed were not regularly saving for retirement. And with such low levels of regular savers, it comes as no surprise that just 20% of those surveyed felt confident or very confident that they would be able to retire comfortably.

A generation of people working through retirement?

The knock-on effect of not making the right preparations for retirement is the likelihood of having to work well beyond the state pension age. In the UK, 43% of respondents said they’d still be working past 65, while 9% admitted they would never be able to retire.

Your lifestyle during retirement will largely be determined by your financial situation, health and other factors, such as your ability to ‘keep up’ with the demands of work. Moreover, if you’ve spent your adult life working hard to build a business, don’t you want to take some time out to travel, spend time with family and friends and enjoy the life you’ve worked so hard to build?

“Here’s to the ones who dream”

As Sebastian and Mia discovered, taking a chance on the career that you want can be worth all the sacrifices. But going it alone also can present challenges for saving, planning and preparing for retirement. Instead of living in 'la-la land' and putting these challenges off, here are some practical tips to address them:

  • Start saving early and get into the habit of saving consistently over time. The best way to be consistent is to automate your savings, by setting up automatic transfers from your current account to a savings account.
  • Take full advantage of any tax incentives available to you, for example paying into a personal pension and making full use of annual Individual Savings Account (ISA) allowance and annual allowance.
  • Talk to a regulated financial adviser about your self-employed status and your long-term retirement goals. They can help you come up with a well-developed strategy that enables you to achieve your goals and retire comfortably at a time that suits you.