26 Lowther Street, Carlisle, CA3 8DA
There are 4.8 million self-employed people in the UK and only a third have any kind of pension arrangement. A shocking statistic when you consider that State support is shrinking and we’re all living longer. Saving for a pension when you’re self-employed is not as straightforward as it is for an employed person, who might automatically benefit from a workplace scheme and employer contributions. We’ve outlined some key points for you to consider:
Whether you’re employed or self-employed you’re entitled to the full basic State Pension (currently £168.60 a week) if you’ve paid in 30 years of National Insurance Contributions. If you’re self-employed you can only claim the additional State Pension if you’ve had periods of employment. On its own State support is unlikely to enable you to continue your current standard of living into retirement. That’s why it’s imperative for the self-employed to find other ways to provide the additional income needed in retirement.
It’s stating the obvious, but the sooner you start saving into a pension the bigger your potential retirement fund. You’ll also have more time to benefit from the tax relief that’s available.
To highlight the importance of saving early, a 25-year-old male looking to retire at 68 would need to contribute £236.25 per month in order to achieve a retirement income of £17,500 a year. If the same man had waited until he was 45 before he started saving, he would need to contribute £495.83 to achieve the same level of income, an additional £259.58 per month.
One of the main benefits of paying into a pension is the tax relief the savings attract. For example, if you’re a basic rate taxpayer and pay £80 into your pension you effectively end up with £100 to invest. The maximum amount you can save each year that attracts tax relief (otherwise known as the annual allowance) is £40,000. Importantly, if your income is low and you’re not able to save the full £40,000 in one tax year, you can carry forward any unused allowance, and use it towards contributions in the next tax year.
Please note:
•You must have been a member of a registered pension scheme during the years you want to carry forward
•Your tax relief is limited by your annual earnings in the year you want to carry forward
•You can only carry forward unused allowance from the three previous tax years
The self-employed can choose from a range of different pension products, including stakeholder pensions, personal pensions and Self Invested
Personal Pensions (SIPPs). Each has its advantages and disadvantages – we can advise on which is best for you.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes, which cannot be foreseen.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
Disclaimer: The information on this website is for use of residents of the United Kingdom only. No representations are made as to whether the information is applicable or available in any other country which may have access to it.
Registered Address: 26 Lowther Street, Carlisle, Cumbria, CA3 8DA
Company Number: 05718865
Stan Sherlock Associates Limited is an appointed representative of the Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the financial conduct authority.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Some buy to let mortgages are not regulated by the financial conduct authority.
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