Pension Schemes For The Self Employed – Why You Need One And Where To Look
I’ve spoken a lot about the importance of a pension and saving towards your future retirement. It’s not a nice thing to have to think about, and at the rate we’re going we won’t be retiring until we’re 80. But the earlier you think about it and start saving the better! If you’re employed by a company your pension may be simply a background thought as it comes out of your wages without you thinking too much. But pension schemes for the self employed are so important as over 60% of self employed people have no pension savings according to Fidelity.
It’s easy to put saving into a pension to the bottom of your financial to-do list, especially after the past year. You may think you can’t afford to put into a pension, but the longer you leave it the less time it has to grow.
If you’re self employed and don’t have a pension it’s not too late you can make a start now. It doesn’t matter how much you earn or how irregular your earnings, there are plenty of ways to start.
Pension schemes for the self employed- Options you have
Being self-employed means you won’t benefit from employer contributions into your pension, but you can still benefit from a government tax incentive. So it’s worth looking into the options available and choosing what’s best for you.
NEST Pensions
If you’re self-employed, or the sole director of a company who doesn’t employ anyone else you can join NEST pensions. This is a low cost pension scheme run by the government. You’ll get some benefits like basic rate tax relief on any contributions you pay. And you can add as much or as little as you like as long as it’s at least £10.
NEST works if you want flexibility to pay in as and when you want. Although it is best to set up a direct debit so you’re paying inr regularly and get used to being without the money. This is something I’m going to look into for Luke asap.
Pension portfolio
You can use a provider with ready-made pension portfolios such as PensionBee, Penfold or Raindrop.
These digital providers are easy to set up and are designed for people who don’t want to be as hands on and want the flexibility of how much you pay in and when. Fees are also usually low at around 1% or less.
Other digital providers, like Nutmeg and Wealthify also provide easy to set up pensions but you may have to contribute a minimum amount per month. You’ll answer questions about your attitude to risk and they will suggest a portfolio for you to invest in.
Personal pension schemes for the self employed
You can set up your own personal pension with an investment or insurance company. You can have a shareholder pension, or a self-invested personal pension (SIPP).
A shareholder pension is good if you want to keep things simple and don’t fancy picking out investment funds yourself. You can get these via banks, investment companies and insurance firms. You can pay in a fixed amount per month, or however much you want. Then your money will be invested in a default fund suitable for you based on your age and any preferences. You’ll be charged a fixed fee capped at 1.5% for the first 10 years.
A SIPP is a good choice if you’re confident in investing and want to make all your own investment choices. You’ll have choice over how your pension is invested
If you’re self employed do you have a pension?
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19 responses to “Pension Schemes For The Self Employed – Why You Need One And Where To Look”
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I didn’t pay into a pension when I was self employed but I really wish I had !
Great information! It is an important subject to think about and look into, saving in general is always a great idea.
Great post. The longer we wait to get started the worst off we will be. We are self-employed but we pay ourselves a salary that way we pay into the Provincial Pension Plan and we also have private options.
You’re so right that the longer you wait the harder it is x
Thank you so much for this educational post. This is definitely something many others including me don’t really think about.
I recently started researching all of this. It’s so important, especially when you are self employed.
I really need to take my retirement a lot more serious, i don’t have a retirement plan yet! I need to work on getting one.
Good luck on starting one, the first step is usually the hardest x
What a great post as I thought those who were self-employed did not get the chance to have a pension for themselves. I need to find out more about Nest
Argh this is such a adult thing to take care of. I had a plan in place and then started working for myself! I need to get my head out of the sand about this.
The earlier you start the easier it will be x
That is so great to know! Everyone needs to start saving for retirement!
Thanks for this great information. I will certainly share with my bsiness partner.
As so many people are working for themselves, it’s really good to know about pension schemes!
I hadn’t thought about this, and it is good to have a plan for the future. Retirement really is something we need to include in our long term plans.
It is sad that many people do not think about their pensions and saving towards their future retirement until it is tool late in the game.
It’s so true, I think our generation are going to have some problems when we get to retirement x
This is a really helpful and informative post about pensions and self employment. I was talking to a friend the other day who has just become self employed and they didn’t realised theyd have to organise being part of a pension scheme themselves.
Thank you for these great tips. I’m self-employed and really appreciate these insights.