The Exeter research shows lack of financial safety for gig economy and need for protection advice
Nearly a fifth (17%) of self-employed workers in the UK have no personal savings to fall back on in case of a financial crisis, while a further 14% have less than £2000 in savings, research from The Exeter and Cebr has revealed.
Despite this, less than one in 10 (9%) of self-employed workers protect their income with insurance, while 65% of the UK population do not have any form of protection in place.
The findings come in light of government figures that show that more than half of the five million self-employed workers in the UK have claimed a grant through the government's Self-Employment Income Support Scheme - a total of 2.7m claims granted, worth £7.8bn.
The research also reveals that among those surveyed, a third (35%) of self-employed workers do not save anything at all in a typical month. Nearly four in 10 (39%) of those aged between 35-44 years old said they saved nothing per month, the highest of any age group, followed by 38% of respondents aged 45-54 years old and 33% of over 55s.
Despite the low level of savings among the self-employed, 52% of respondents said they would rely on their savings if they suffered a loss of income. However, with 43% of those surveyed saving less than £50 per month.
Andy Chapman, chief executive officer of The Exeter, said: "Self-employed and gig economy workers are a large part of the UK's labour market, representing 15.3% of the workforce. However, despite the benefits which being self-employed can bring, this type of labour can pose risks to an individual's financial situation if they are suddenly unable to work. Indeed, during the peak of the Covid-19 outbreak we saw many of these individuals face an income shortfall almost overnight as the UK went into lockdown.
"Half of self-employed workers in our survey said they would use their personal savings if they experienced a loss of income, despite a concerningly low level of savings among this group. However, what is perhaps more worrying is the significant level of underinsurance among this group, with just 9% of those surveyed saying they had income protection. Whilst no one wants to consider not being able to work, it has become apparent that having a financial safety net is no longer a nice to have.
"Advisers have a golden opportunity to kickstart conversations with their self-employed clients and raise awareness of income protection. Advisers are vital in shifting the way we view protection and play a critical role in narrowing the UK's protection gap."
COVER has teamed up with The Exeter to bring you a guide to financial resilience for the self-employed. The guide aims to serve as a useful explanation of how important it is to ensure a conversation about income protection is on the adviser/client agenda, and how you can make that happen. Click here to access the guide for free today.