Time won't wait for you to plan for your future
“Time is a great healer, but she's a lousy beautician.”
She's also not a great doctor. But where she's really disastrous is as an accountant. She'll leave you skint at 70, if you give her half a chance.
This is partly why I have a job. A lot of people don't accept that they're getting older, don't see that they may want to, or even have to, give up work someday. With a hundred other things on their minds, they feel too busy to plan for their financial twilight .
It makes me want to go out and buy them a mirror, and show them they're not as young as they used to be!
The problem is particularly prevalent for the self-employed, according to a new report by the Association of Independent Professionals and the Self-Employed (IPSE).
There are number of good reasons for this.
First, working for yourself can be a precarious way of life. You live in a constant state of financial insecurity, with no guaranteed wage coming in every month. For that reason, many self-employed (20 per cent of them, according to IPSE) are unwilling to put money away where they cannot access it quickly in an emergency. In short, they don't feel comfortable with pension saving.
This is made worse by the fact that self-employed tend to be older and closer to retirement age. In fact, 44 per cent of all self-employed people in the UK right now are aged between 50 and 65. While the average age of a company employee is currently 29, the average self-employed person is 46.
When I look at the finances of tradesmen in their middle life, I try not to sound like the TV sitcom fella who takes a look at your plumbing, scratches his head and sighs: “Oh dear oh dear. You should have called me in about this years ago.”
However, it's getting to that stage now. This is a problem that is reaching epidemic proportions, when you look at how many are involved.
Rising by 50 per cent since 2000, the total number of self-employed people in the UK now stands at 4.8 million. While automatic enrolment has pushed the number of employees paying into a pension up to 78 per cent, that figure has fallen in the self-employed sector. Less than a third (31 per cent) of self-employed people are currently paying into a pension.
Does this mean they are salting cash away for their retirement in other ways?
Doesn't look like it. IPSE tells us just 33 per cent are using ISAs to save for later life, while only 2 per cent are using Lifetime ISAs (LISAs), the special ISA to put money aside for a first home or retirement.
I can hear that old phrase I have quoted so often in the past: this is a pensions timebomb, a tragic financial accident waiting to happen.
IPSE suggests a new type of ‘sidecar pension' for the self-employed, where savings would go into a main pension but a portion would go into a ‘sidecar' fund which, if needed, would be available for a rainy day.
Do you think we need to talk about this? Of the self-employed people surveyed by IPSE, over a quarter (26%) believed that they would benefit from good quality financial advice on a pension.
Which brings me to a Chinese proverb dear to my heart.
“Man who stand on side of mountain with mouth open, waiting for roast chicken to fly in – he have long wait.”
It's up to you. Do it now, or hope that it happens by itself?
Take your Time.
In other words, every one of us is getting older. If you are 21, you are coming 22 and if you are 55, you are knackered after the wains and you are wishing there were less stairs out there on that landing.
She is also a lousy doctor, a lousy nurse ... and a lousy accountant.
:: Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information is available on the Facebook page 'Kennedy Independent Financial Advice Ltd' and website www.mkennedyfinancial.com