Around two million of the country’s self-employed workers are unable to save any money each month leaving them vulnerable to financial shocks.
The same body of workers spend more on bills than the UK average and only 4% enjoy the benefit of income protection insurance cover which would kick in if they were unable to work.
These worrying findings about the self-employed sector were revealed in insurer LV=’s second instalment of its Income Roulette report, a study of debt, savings and protection among 9,000 people.
The results show that four-in-ten (41%) self-employed people can’t afford to save any money each month and a further one-in-ten (11%) saves less than £50. A third of respondents said they could not survive for more than three months if they lost their income.
This means they fall short of the Money Advice Service’s recommended amount of savings that ought to be kept in reserve to maintain a level of financial resilience when an emergency strikes.
Looking at the barriers to saving, LV=’s figures show that monthly bills eat up the wages of nearly two-thirds (62%) of self-employed people; this compares with a national average of 56% taking employed workers into account.
Aware of the risks
Despite the lack of savings and insurance, the research confirmed that the self-employed were aware of the financial risks attached to this method of working with nearly three-in-ten (28%) respondents citing worries about having an accident and not being able to work as a result. A similar proportion (29%) said they were concerned about falling sick and being put out of commission.
There are around five million self-employed workers in the UK who made a contribution of about £250 billion to the economy last year. A new guidance body will be established in 2018 to help sole traders and small businesses, alongside other groups at risk of financial shock. The Single Financial Guidance Body (SFGB) is the result of a merger of The Pensions Advisory Service, Pension Wise and the Money Advice Service. LV= said it is calling on the government to give the SFGB a specific remit to focus on promoting UK financial resilience