Self Employed Pensions

you can have a pension if you’re self-employed and it will likely be sensible to make sure you have one setup. However, like all aspects of being self-employed, it’s something you’ll have to look at setting up yourself and potentially using the services of a financial advisor.

Self Employed Pension Types

There’s a wide range of pension options available for self-employed people.  You can essentially arrange almost any type of defined contribution/money purchase scheme.  The most common options available include:

  • Personal pensions
  • SIPPs
  • Stakeholder pensions

Personal Pensions

Personal pensions are schemes which you can set up yourself in order to save up towards your retirement.  The value of your pension fund in this scheme and all other defined contribution schemes is dependent on: the size of your contributions, how long you contribute for and the investment performance.

When setting up a personal pension you’ll have a choice of funds to invest your money in.  There are often vast amounts of choice in funds which can be quite daunting and picking the right fund(s) for your circumstances can be challenging.  With this in mind, we’d recommend speaking with an adviser to not only help you choose the right pension provider, but also help you select the appropriate fund(s) for your investment.  

Once your personal pension is set up you can make both regular and lump sum contributions to the pot.  The pension provider will also automatically claim tax relief on your contributions for you and add it to the pension pot.  

With modern personal pensions compliant with the Pensions Freedom Act you can access your pension fund from as early as age 55.

SIPPS

A SIPP is a Self-Invested Personal Pension. It’s a form of defined contribution scheme that allows you to choose your own investments.  It works in the same way that an ordinary personal pension does, meaning it builds up a pot of money through your regular contributions and investment performance. The key difference however, is that you usually have a much wider choice of vehicles to use for your investment. If you don’t want to choose your own investments you can get help from a financial advisor.  

Tax relief on pension contributions

Pensions are hugely important to ensure that once you reach retirement age you have sufficient income to support the lifestyle that you want or need.  This alone should be reason enough to make sure you’re contributing towards your pension scheme, however as an added benefit pensions provide a huge amount of tax relief.