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LV= Insights

Unprotected self-employed more at risk of financial crisis

5 October 2017

The 2017 report by LV= title ‘Income Roulette' [1], based on research conducted with over 9,000 people, reveals that many self-employed people in the UK are unable to save any money each month leaving them vulnerable to financial shocks.

  1. Around 2 million self-employed people can't afford to save anything and 62% said monthly bills swallow up the majority of their income.
  2. Only 4% of UK self-employed have income protection cover, which could leave them struggling financially if they were unable to work.
Graph showing 2/5ths
The UK self-employed worker

There are now nearly five million self-employed workers in the UK.

Around two million of them can't afford to save anything each month[2]. And a further one in ten (11%) save less than £50 a month.

Further to this, a third say they wouldn't be able to survive for more than three months if they lost their income which means they are do not have the recommended level of savings they would need to be financially resilient. The Money Advice Service says you should have enough savings to cover 90 days’ worth of outgoings to enable to you cope with financial shocks.

Barriers to saving

In this group of self-employed, monthly bills eat up the wages of two thirds (62%) compared to a national average of 56%.

This group is also more likely to be burdened by debt (38% vs 32%).

Sole traders are also more likely to be hit by unexpected costs such as home maintenance and car repairs (33% vs 28%).

Being covered if you're not able to work

Self-employed people don’t have the safety net of employers’ benefits, such as sick pay. They are often recommended to consider taking out some form of income protection[3] to avoid having to rely on state support if they couldn’t work because of accident, sickness or disability. Guidance for self-employed people on the Money Advice Service website recommends they consider taking out some form of income protection to avoid having to rely on state support.

Umbrella over money "4% of self-employed people have income protection"
  1. This is compared to a national average of 11%.
  2. More than two fifths (42%) mistakenly believe that they’re not eligible for it .

Three in ten are worried about having an accident and not being able to work. The same amount are worried about falling sick and not being able to work.

What’s next?

Small businesses and entrepreneurs are a crucial part of the UK economy so it's important that the Government finds ways to support them. We believe that the Single Financial Guidance Body (SFGB) should have a specific responsibility to build financial resilience among UK households, particularly in the most vulnerable groups like the self-employed.

The labour market has changed markedly in recent years, with self-employment continuing to rise. The Government’s Taylor Review sought to address the challenges of the modern workplace and ensure all workers are aware of their rights, but it’s often the case that self-employed people and small business owners lack the safety net of an employer’s benefits, such as sick pay. This means they risk having to rely instead on state benefits which can involve a lengthy application and wait, with no guarantee of any support. We recommend self-employed people speak to a professional financial adviser about whether they’d benefit from taking out private insurance, such as an income protection policy that will pay out if they couldn’t work because of accident, sickness or disability.

Justin Harper, Head of Protection Policy at LV=
Photograph of Justin Harper, Head of Protection Policy at LV=

Are you at risk? Use our Risk Calculator to check.

To help you and your clients understand the chances of being out of work or suffering a serious illness, LV= has created a handy online tool.

Using our new Risk Calculator, the results show that a 30 year-old, female, non-smoker who wants to retire at 65 has a one in four (26%) chance of not being able to work for three months or more in their working life. This increases to around one in two (47%) when looking at the risk of being unable to work for two months or more.

An example of how our calculator breaks down the risks...

illustration of the risk calculator results

The full ‘Income Roulette’ report will be published later this year.

[1] Methodology for research: YouGov, on behalf of LV=, conducted online interviews with 9,495 UK adults between 5th and 10th July 2017. Data has been weighted to reflect a nationally representative audience. Among the research there were 676 respondents who are self-employed.

[2] Sum: The Resolution Foundation reports there are 4.8 million self-employed workers in the UK (A tough gig? The nature of self-employment in 21st Century Britain and policy implications). 4.8 million x 42% = 2,016,000 unable to save


Definition of self-employed: within this context, LV=’s definition of ‘self-employed’ covers sole-traders, freelancers and micro businesses.

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Liverpool Victoria Financial Services Limited, registered in England with registration number 12383237. County Gates, Bournemouth, BH1 2NF, UK