As we’ve mentioned before, more and more people are becoming self-employed. According to Government statistics, currently around one in seven people in employment are self-employed in their main job.
There are numerous benefits to being self-employed, such as better work / life balance, independence and the ability to choose your work hours, but it’s important to remember that you also take on full responsibility for your finances. There are no more paid holidays, tax stopped at source or pension schemes paid into on your behalf.
And it’s a lack of pension planning that is concerning the Federation of Small Businesses.
According to their report “Supporting self-employment in the UK“, only 31% of self-employed people are saving into a private pension. While respondents said not having security of income – such as not knowing how much money they will earn month to month – was their biggest challenge, it seems we’re not looking to the future at our retirement income.
In fact, 27 per cent are planning to rely on their business to fund their retirement; which could be incredibly risky, while 20 per cent have other savings and investments which they intend to put towards their retirement. 16 per cent have property investments, such as buy-to-let properties. Most worrying of all, 15 per cent of respondents would appear not to have any savings to fund their retirement.
So if you’re self-employed, and facing the battle of an unfixed income each month, what’s the answer? The temptation is always to invest everything into growing the business, but with people living longer, you need to ensure you’ll have a comfortable retirement too. Bearing in mind there are limits to how much you can contribute to a pension every year, it’s crucial to start straight away.
Fortunately, there are plenty of options. For example, if you’re under 40, a Lifetime ISA can help towards a pension fund. A self-invested pension plan (Sipp) can be used to help grow the business. And don’t forget to fund your state pension through National Insurance Contributions.
We’ve got plenty more ideas for personal pensions, so contact us now to discuss the best options for you.