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Contractors urged to think about their retirement plans

If there’s one thing that contract workers tend to not spend much time thinking about it’s their retirement plans – but this may be changing sometime soon.

According to some new research from Prudential, only one out of every three contractors actually possess some sort of pension. This is a far cry from the 51 per cent of traditional employees who actually do have one, and this has some possibly dire results for anyone who works for themselves: in particular a freelancer or other interim worker could miss out on more than £90,000 over the course of their self-employment because there’s no company pension scheme making contributions in their name.

Now I don’t know about you but where I’m from 90,000 quid is quite a bit of cash. I’d love to know how the pendulum can be swung back in favour of contractors, and I’m not the only one: the Demos think tank recently made the suggestion that the self-employed need to be granted access to a portion of their pension contributions in order to ensure that cash will be there waiting for them when it comes to retirement.

Providing a more flexible solution for the self-employed could lead to some serious peace of mind for contractors, according to Demos research director Duncan O’Leary. It’s especially psychologically gratifying to know that someone can access at least a portion of their pension in the case of a financial emergency or something similar, and I’m inclined to agree.

Unfortunately there’s still just too many freelancers out there that don’t have much in the way of either rainy day savings or a nest egg built up for the future. It comes with the territory, sadly, as any retirement plans have to be managed by hand instead of simply relying upon your employer and its benefits package from handling things behind the scenes. Perhaps it’s not such a bad idea for freelancers to contract out their accounting to an outside firm or individual; in addition to having your tax details handled a contractor accountant can also ensure that a freelancer has a portion of his or her income set aside in a safe retirement plan that can provide some security for the future. If the Demos suggestion is adopted this could make pensions much more attractive for freelancers as well.

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