Amid the busy day-to-day life of running your own business, it can be easy to put thinking about your retirement to one side. However, focusing on the bigger picture and getting your retirement plans in place now will benefit you in the future.
The launch of auto-enrolment in 2012 meant millions of workers were getting a pension for the first time. However, those who are self-employed are excluded from auto-enrolment and therefore loose out on having their pension set up for them automatically.
The self-employed pension gap
This has resulted in a large pension gap with the self-employed falling far behind when it comes to saving for retirement. Auto-enrolment combined with the lack of income security that results from self-employment has meant many people are reluctant to save for their retirement when it is often so far away.
It can be thought of as a hassle to set up your own pension scheme and decide what investments are suitable for yourself.
At Four Wealth Management, we work with you to take away this hassle. A financial adviser will sit down with you, take the time to understand your individual circumstances and goals. Your adviser will then create a bespoke retirement plan and recommend a portfolio of investments to help you reach your individual goals.
Book your no-obligation meeting to discuss starting your pension now
Review your old workplace pensions
It is likely that before you chose to go self-employed, you were employed for a period of time. If you were employed at multiple jobs, then you are likely to have started various pension plans with different providers. It is unlikely that you will know what these old pensions are invested in, how they are performing or what charges you are paying.
A financial adviser at Four Wealth Management can review all of your old pensions for you and run analysis on the performance and let you know if the selected funds are in line with your retirement goals. As you are unlikely to have selected the funds yourself you are likely to have been placed in a default fund which might not be performing as well as you had hoped.
Book a no-obligation review of your existing pensions
How much can I contribute?
One issue that some self-employed workers have is the unpredictable nature of their income. Self-employed earnings can be uneven so it can be hard to work out how much to contribute each month or year.
Generally, most people can contribute up to 100% of their earnings or £60,000 per tax year, whichever is lower. You receive tax relief on this amount.
A financial adviser at Four Wealth Management can help you calculate what you can contribute each month to your pension, you can change this at any time.
Carry forward unused pension allowance
You can also carry forward any unused pension allowance from the previous three tax years. This means if you do inherit a large sum of money, you can contribute a large lump sum and benefit from tax relief. If you would like to carry forward unused allowance, it would be useful for you to speak to a financial adviser so they can calculate the exact amount you can contribute.
For example, in the 2022/23 tax year, the annual pension allowance was £40,000 but if you only contributed £30,000 that tax year then you can carry forward £10,000 to contribute in the current 2023/24 tax year.
Pension carry forward allowance is useful for business owners or those who are self employed and have irregular income or for those who want to make larger pension contributions in a specific year.
The carry forward allowance is complicated, especially now that the annual allowance has changed from last year tax. A financial adviser at Four Wealth Management can help you to calculate how much you have remaining and if you need to declare anything to HMRC.
Book a no-obligation meeting now to discuss your pensions
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
