The rise of the silver freelancer

For those who have been freelancing or self-employed for a decade (or two), working any other way, even in retirement years, is almost unthinkable. Katherine Steiner-Dicks looks at how our longevity as a nation should be motivating politicians to embrace the economic benefits of freelancing.

We are living longer. But some of us will live longer than we ever expected. And that means we need more money to support ourselves in our older age. According to the latest data, there were 15,120 centenarians in the UK in 2020. This is an increase of almost a fifth from 2019. The average life expectancy at birth for UK women is 82.9, but in ten years, that age could rise.

For example, the UK’s oldest person, Ethel Caterham celebrated her 113^th birthday on 21 August. She reached state pension age in 1969 – 53 years ago. In 1969 a full basic state pension for a single person was £5 per week. For a couple, it was £8.10. Today, the full basic State Pension is £141.85 per week. Still not enough to live on given the cost of everyday items, house prices, and rising interest rates.

Having an economy and government that embraces self-employment will help more people in their older years to support themselves through freelancing and contracting on projects. But if more stifling tax and workforce policies, such as IR35 and the loan charge, are introduced and poorly executed, then more of us will become poorer. And that spells bad news for the economy and the Treasury.

Rise of the state pension age and the Cost of Living

• 12.5m people now receive the state pension. Of this 2.5m receive the new state pension, a 650,000 increase on this time last year.
• The gender state pension gap continued to close. Average incomes for women were £165.05 per week for new state pension and £146.70 for those on the old state pension.
• This compares to average male income of £170.49 per week on the new state pension and £172.71 for the old state pension.
• Just over 1.9m people receive less than £100 per week in state pension. Just under 1.5m of these are women.
• This time last year 2.1m people received less than £100 per week. Of these 1.64m were women.
• As of February 2022, 1.38m people were on Pension Credit. This is before the government’s Day of Action designed to boost awareness of this benefit.

The rapid increase in state pension age as the government seeks to manage the cost of providing a benefit that could be being paid out for 50 years or more in some cases. The trajectory for further increases is subject to an ongoing government review. But a review that is not likely to be taking into account the changing dynamics of today’s self-employed and freelance workforce and how they are best suited to work (hybrid or remote and into their 60s and beyond).

“It also raises questions in terms of our wider financial planning,” says Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown. “Most of us will not reach Ethel’s amazing milestone but the reality is we need to prepare for a retirement that could last twenty years or even more,” she says.

This not only means we need to look at whether we are contributing enough to our pensions throughout our working lives, but we need support in terms of adopting a more flexible approach as retiring at 65 may not be a financial reality for many people. suggests Morrissey.

We are seeing older workers return to the workforce in response to the current cost of living crisis and there are also many people who want to continue working from a wellbeing perspective, she says.

“Flexible working and access to support and training will be vital in helping older people remain in the workforce as long as they need to,” says Morrissey.

How you can boost your state pension

There are around 4.5 million self-employed people in the UK, accounting for 15% of the UK workforce. Yet just 31% of self-employed people are saving into a pension. (Source: IPSE)

One big attraction of being self-employed is you don’t have a boss. But, in terms of pensions, this can be a disadvantage. If you’re self-employed, you won’t have an employer adding money to your pension in this way. But there are still some tax breaks it’s important to not miss out on. For example, you’ll get tax relief on your contributions – up to the lower of your annual earnings or £40,000 a year.

This means if you’re a basic-rate taxpayer, for every £100 you pay into your pension, the government will add an extra £25.

If you pay enough tax at the higher rate of 40% in England, Wales or Northern Ireland – you can claim back a further £25 through your tax return for every £100 you pay into your pension.

1. ‘’Go online and check your state pension entitlement on Check your State Pension forecast – GOV.UK (www.gov.uk) This will also tell you your state pension age.
2. Claim child benefit – Women in particular miss out on valuable state pension credits when they are at home looking after children. However, if they claim child benefit, they will receive NI credits that count towards their state pension. Many women have missed out on this in the past because their husband claimed the child benefit rather than them. Others missed out when they opted out of child benefit after the introduction of the high-income child benefit tax charge. If you claim child benefit in your name, then you will get the NI credit towards your pension.
3. Specified Adult Childcare Credit – Are you under state pension age and looking after a family member under the age of 12 while their parent or main carer goes back to work? If this is the case, you could qualify for NI credits under Specified Adult Childcare Credit as the working parent essentially transfers their NI credit to you.
4. Buy NI credits – If you can spare the cash you can plug gaps in your NI record by buying voluntary class 3 NI contributions. Buying a full extra year costs around £800 but it’s worth checking with DWP before you do so to make sure you will benefit from the extra contributions.
5. Claim Pension Credit – If you are over state pension age and on a low income then you should check whether you are eligible for Pension Credit. Pension Credit tops up your weekly income to £182.60 if you’re single and £278.70 in joint income if you have a partner. It also entitles you to other benefits such as help with council tax and a free TV licence. Anyone who thinks they might be eligible should go to Pension Credit: How to claim – GOV.UK (www.gov.uk) or call 0800 99 1234 for more information.”

Source: Hargreaves Lansdown