What pension can I get if I'm self-employed?

If you’re self-employed, you can set up a personal pension to save for your retirement. You can add regular contributions or make ad hoc payments into your self-employed pension, and your pension provider will claim tax relief and add it to your pension pot.

Why it’s important to have a pension if you’re self-employed

While almost 50% of employees are paying into a pension, amongst self-employed workers the figure is only 18%. Employers are obliged to automatically enrol their employees into a workplace pension scheme but if you’re self-employed then it’s up to you to start a pension.

This means that many self-employed people may struggle to make ends meet in later life, as the maximum State Pension is currently only £164.35 a week, and the State Pension age is rising.

Not only is pension saving an important consideration if you’re self-employed, but pensions come with some unique benefits, including:

  • You get at least 25% pension tax relief from the government, so if you pay in £8,000, the government effectively adds £2,000 to your pension.
  • Good pension plans give you low-cost access to professional investment managers who invest your money in a range of assets, which is a sensible way of managing risk.
  • If you die before 75, your pension can usually be passed on to your beneficiaries as a lump sum without inheritance tax deductions.
  • New pension freedom rules mean that you’ve got more choice over what you do with your pension savings when you reach retirement, including taking up to 25% as a lump sum without paying tax.

Setting up a self-employed pension

If you’re self-employed and setting up a private pension, you may want to start by finding any old workplace and personal pensions so that you can combine them into your new pension plan for easier management.

If you want to move your pensions over to PensionBee, we can locate and transfer your pensions into a new PensionBee plan. Otherwise, you can contact your pension providers to get your pension balances, or try the Pension Tracing Service if you’re struggling to track down your providers.

When you’re ready to set up your self-employed pension, you have several options, including a personal pension, a self-invested personal pension (SIPP) or a stakeholder pension. The government scheme NEST (National Employment Savings Trust) is now open to self-employed people too. There’s no best pension for the self-employed, and what fits best will depend upon your individual circumstances. Finding a provider who lets you make contributions as and when you want can be a good option though, because your income may not be as predictable as you’d like.

Opening a PensionBee pension

The PensionBee plans are personal pensions that are open to employed or self-employed people. Like all personal pensions, they’re defined contribution pensions, which means the amount you have when you retire depends on the amount paid in and the performance of your investments. PensionBee’s pensions for the self-employed can be managed online, and you can set up regular contributions or add one-off payments from your BeeHive.

Managing your pension

Once your new pension plan is up and running, you need to decide how much to pay into it. Of course, this depends on factors like how much you can afford to contribute and how much you think you need to live on in retirement, but a contribution amount that’s sometimes suggested is 15% of your pre-tax income. If your freelance income fluctuates, you may opt to pay ad hoc amounts into your pension rather than - or as well as - regular contributions.

It’s a good idea to check your pension every so often to see how your investments are performing and how your savings are building. You can check your PensionBee pension online from any device, and see how you’re doing in relation to your retirement goal.

Sign up to PensionBee now.

Last edited: 26-09-2018

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