For most new freelancers, the most significant financial concerns are making sure they have enough money to pay their bills, buying any necessary equipment, and keeping an eye on their finances. A pension for freelancers may not be something that you think about for at least a few years. However, you should always try to get into the habit of saving money for your retirement. It doesn’t matter whether you are putting away £20 or £20,000 it’s still worth thinking about. Because if you, don’t you could lose out on thousands of pounds when you are older.
Almost five million people in the UK are self-employed, which has surged by nearly 50% in the past 20 years.
State Pension For Freelancers.
The state pension is an integral part of your retirement planning. If you’ve regularly paid NI contributions or received income from any other source (salary, investments, rental income), you should be entitled to the state pension.
Even if you qualify for the entire state pension, don’t assume it will be enough to live on. The current state pension is £175.20 per week, equivalent to just £9,110 a year. There’s no guarantee, either, that this amount will continue to rise with inflation in the future. So make sure you take out a private pension to ensure a comfortable retirement.
Private Pension for Freelancers – Your Options.
However, only one-third are saving into a pension, according to figures from the self-employed industry group IPSE.
This is causing concern the UK is facing a spike in pensioner poverty as more self-employed and freelance workers reach the state pension age.
Paying into a pension rather than putting your hard-earned cash in a savings account is tempting, but there are benefits to be had from both methods. If you’re a sole trader in England, Wales or Northern Ireland paying basic-rate tax, you can save 25% on your tax bill by paying into a pension fund.
So if you paid £100 into your pension from a personal bank account, you’ll effectively get another £25 as tax relief. At the higher rate of tax that climbs to £45 and at the top speed, you’d get £50. (There are similar, if less generous, arrangements in Scotland.)
If you’re self-employed and wondering how you’ll fund your retirement, read on, as we outline your options below
A personal pension is a type of pension plan mainly for people who don’t work for a company or small business. The person drawing the pension – generally over 65 – will not have an employer contributing to the scheme and will be responsible for investing their own money.
You’ve worked hard and saved to get where you are today. But what happens the next time your employer changes schemes? What if you can’t access your pension savings when you break up with a partner?
A self-invested personal pension (SIPP) gives you the chance to spread your investments more widely, including shares, investment funds and property, without paying excessive charges.
They are offered through specialist providers, or through online investment companies such as Hargreaves Lansdown, Fidelity or Vanguard. You can also select a ready-made portfolio through a SIPP.
The Lifetime Isa provides for both your retirement and your first home, while helping the government contribute to both plans. It’s a powerful way to save.
Property an Alternative Pension for Freelancers
Refined over the centuries through experience and trial, this is still seen as by far the best means of building up an income for retirement. It has the advantage of letting you keep control of your investments, and many liken it to finding a magic money tree.
However, if you’ve found yourself in the fortunate position of having built a successful business over the years, you may want to consider an exit strategy.
Tax relief isn’t available when you make withdrawals. But when you invest in stocks and shares, you can make potentially higher returns. The fees are typically lower when compared to pensions. Plus, the money in your Isa is easy to access.
Past Pension Schemes
You’ll likely have built up different amounts in different company pension schemes over your working lifetime. Now that you’ve left, you’ll probably need to find out what those schemes are.
We’re confident that carrying out your painstaking research into your pension provisions has given you the information you need to ensure that everything is in order. However, don’t forget to check your paperwork to make sure there are no nasty little surprises waiting for you.
We spend our whole lives trying to balance the need to save for old age with the demands of ‘having money to spend now’. The problem, of course, is that no one tells you how much you should save. So when one of those pension companies offers you an online pension calculator, it’s easy to feel overwhelmed by the sheer number of figures you’re meant to work out – in fact, many people can feel so confused that they give up
You don’t want to leave your pension saving to the last minute because it means you’ll have to save more money to achieve the same pension pot, so you should start saving early.
Thank you for reading our article on Pension for Freelancers we hope it was helpful.