Warnings about savings deficits

A massive savings deficit among the self-employed is “storing up real trouble”, the Federation of Small Businesses (FSB) has warned.

It comes after the UK Government Office of Tax Simplification (OTS) called for a full review of the independent savngs account (Isa) landscape, saying take-up of the lifetime Isa (Lisa) among the self-employed had been disappointing.

OTS also highlighted that only 17% of selfemployed people have a private pension, compared with 78% of employees.

FSB chairman Mike Cherry said: “The huge savings deficit among the self-employed is storing up real trouble for the future.

“Some had hoped that the Lisa would crack the problem. Clearly, that’s not been the case.

“It’s good to see the OTS noting our recommendation that the age limit for new Lisa contributions should be increased.

“Because selfemployed incomes often fluctuate throughout the year, early exit penalties can put them off taking out a Lisa.”

Mr Cherry added: “If you’re not always sure where your next piece of work is coming from, not having ready access to your savings is a daunting prospect.

“Improving the Isa landscape will go some way to improving savings rates among the self-employed.

“Over the longterm, though, more meaningful intervention is needed to ensure the self-employed are ready for retirement.”

Mr Cherry said an OTS proposal to remove the need to report dividend income that falls below the allowance threshold “makes sense”.

“Early exit penalties can put them off taking out a Lisa”