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What Is a Self-Employed Pension?
If you’re self-employed, you can save for your retirement in a personal pension. It’s flexible. You can pay regular contributions or make ad-hoc payments to your self-employed pension. Even though you’re self-employed, your pension provider will claim basic rate Income Tax relief and add it to your pension pot.
It’s important to have a pension if you’re self-employed. Employers are required by law to set up a pension scheme for their staff. This means the majority of employees pay into a workplace pension.
If you’re self-employed it’s up to you to start a pension but most self-employed workers don’t have a plan in place. If this sounds like you, you might struggle to make ends meet in later life. The maximum State Pension is around £175 a week (2020/21), and age at which you qualify for it is going up.
What Are The Benefits of a Self-Employed Pension?
A pension for self-employed comes with some unique benefits, including: –
- The government tops-up your contributions. For every £100 you pay, they add £25.
- You can choose what to do with your pension pot when you reach retirement. You can take a cash sum, buy an annuity or access your pension pot flexibly using drawdown.
- You can draw out up to 25% as a lump sum tax-free from age 55.
- Your pension savings are managed by professional investment managers. You invest in a mix of assets using a range of risk targeted funds.
- If you die before 75, your pension pot can be passed on to your beneficiaries as a lump sum with no tax.
How Do I Start a Self-Employed Pension?
There are several different types of plan to choose from including: –
- A personal pension,
- A self-invested personal pension (SIPP)
- A stakeholder pension.
- NEST (National Employment Savings Trust) which is now open to the self-employed.
The best option for you will depend on your individual circumstances. It’s important that the provider will allow you the flexibility you need. For example, that you’re able vary your contributions as your income dictates.
You can get off to a good start if you combine any old workplace and personal pensions you may have accumulated so far in life with your new self-employed pension plan. This should make it easier to administer your pensions. It will also ensure that your investment strategy and your investment risk is aligned with your current circumstances and your objectives.
We can help you to transfer any old pensions you might have and consolidate together with your new pension plan. The amount you’ll get when you retire will depend on how much you’re able to pay in, and the performance of your investments. You might’ve already decided how much you want to contribute. If not, we’ll recommend how much you’ll need to pay to get the pension you want.
Once everything is set-up we’ll meet regularly to review the progress of your plan and adapt it as your circumstances change. We’ll always be available to speak with you and we’ll give you online access to your plan via a client portal.