Recent figures show one in five self-employed individuals are over 50 years old - a number that’s been growing rapidly over the last 10 years. It’s easy to see why many older people might choose self-employment to combat ageism in the workplace. Research shows 48% of over 55s believe their age is a barrier to securing full-time employment.
Along with self-employment, part-time work also looks to be more suitable to older workers due to the flexibility it offers. The UK has seen a 26% increase in the number of individuals over 50 taking up part-time work over the last two years. With one in five people over the age of 50 providing some form of care, finding flexible part-time or freelance work is crucial.
The COVID-19 pandemic has also had a significant impact on the over 50 workforce with many businesses downsizing by letting go of older, more expensive employees. Some who were placed on furlough used this time to reassess their careers, opting to pursue freelance work. While others with savings may have chosen early retirement.
There are many reasons why you might see yourself as an ‘olderpreneur’. If you’re over 50 and self-employed, are considering freelance work or want to start your own business, here are three things to consider.
1. Training and courses
A great way to boost your employment prospects is to re-engage with training and education. At Startup School for Seniors, we offer training and support for over 50s. Many participants hope to turn their hobbies into businesses or use their past work experience to become a consultant. By the end of the programme, one-third of the participants will have made money. And about 10% will have found full-time jobs, often in fields where they initially believed they had little chance of succeeding.
Co-Founder of Startup School for Seniors; Suzanne Noble says: “I’ve been self-employed since my late 20s, and experienced the loss of my contract work in the spring of 2020. Three years prior, I’d developed a startup programme for individuals over 50. Although the programme had been successful, it struggled due to a lack of capital.”
For many over 50s, self-employment isn’t a choice but their only option. However, fear of failure and lack of confidence can discourage them from getting started. Seeing other older individuals in similar situations helps rebuild their confidence, giving them the skills and training they need to thrive in self-employment.
2. Funding opportunities
It’s important to take the time to weigh up your options when it comes to funding your new venture. Whether you save up for a few years, take out a business loan or decide to use your own savings. If you have accessible money in savings and investment accounts, you have the option to use some of that money to kickstart your business. If you have an ISA, you can take the money out tax-free so it’s worth considering dipping into that before accessing other investments.
If you have a personal pension, or a previous workplace pension, and are over the age of 55, you’re able to start withdrawing if you choose. Using money from your pension to start a business means you don’t need to worry about securing a loan, making repayments or the impact of rising interest rates. However, there are some crucial things to consider before you do so.
Co-Founder of Startup School for Seniors; Suzanne Noble says: “In May 2020, we transitioned the course to an online format to support individuals aged 50 and above who suddenly found themselves out of work like me.”
Firstly, only the first 25% of your pension can be withdrawn tax-free so you’ll have to pay income tax on the remaining 75%. Secondly, remember that your pension pot is designed to support you in retirement. So if you’re thinking about withdrawing money to fund your business, make sure you’re leaving enough to live comfortably in retirement. Thirdly, be aware of the Money purchase annual allowance (MPAA), which applies to all defined contribution pensions. If you start withdrawing from your pension, the MPAA could restrict how much you’re able to contribute annually while still getting tax relief. Before you start withdrawing from your pension, the annual contribution limit is currently set at £60,000. This includes money you pay into your pension, tax relief and any payments made by third parties, such as your employer. However, once you begin accessing your pension this reduces to £10,000 (for the tax year 2023/34).
Make sure you understand all the rules from tax implications to withdrawing from your pension while you’re still working. If you’re over 55, try PensionBee’s free Pension Drawdown Calculator. It’ll help you see the impact that future withdrawals could have on your savings and the tax you’ll pay.
Co-Founder of Startup School for Seniors; Suzanne Noble says: “Collaborating with a business coach and educator, Mark Elliott, we created 25 hours of content to assist those interested in freelancing or starting their own business and needing to gain the knowledge to do so.”
From registering with HMRC to understanding tax rules for the self-employed, there’s a fair chunk of admin to do in advance. But don’t let that put you off. When registering as self-employed, you have the choice of setting up as a sole trader or a limited company. Which you choose will depend entirely on your own circumstances and what makes sense for you. PensionBee has a comprehensive guide explaining the two.
Find more information and resources at Startup School for Seniors.
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
Suzanne Noble is a serial entrepreneur and the Co-Founder of the award-winning Startup School for Seniors, an online programme that supports over 50s to turn an idea into a business or grow their existing business’s trading income. Featured on BBC News, the Telegraph, the Times, Buzzfeed, amongst others, Suzanne wants to support those over 50 to manifest the life they desire.