If you are self-employed then planning for your retirement requires you to proactively look at your own pension options in order to ensure you are financially secure when you choose to retire.
There is no specific pension scheme for those who are self-employed. However, if you are self-employed then it is important to remember that you will not benefit from auto-enrolment which is where your employer automatically sets up a workplace pension for you. This means if you are self-employed you must take the initiative to set up your own pension scheme.
Most people who are self-employed set up a personal pension. Most pension schemes allow you to set up regular monthly contributions or to send lump sums when you are able to. Most pension schemes allow you to select your own funds.
Self-Invested Personal Pensions (SIPPs) offer greater control and flexibility over investment choices compared to traditional personal pension plans. With SIPPs, individuals can choose from a wide range of investment options, including stocks, bonds, mutual funds, property, and more. SIPPs are suitable for self-employed individuals who want to take a more hands-on approach to managing their pension investments and have the expertise to make informed investment decisions. Like personal pension plans, contributions to SIPPs are eligible for tax relief, subject to certain limits.
When can I access my private pension?
Personal pensions cannot be accessed until you reach the age of 55 (rising to age 57 in 2028).
How much is tax relief on pension contributions?
As well as building up a pot for your retirement income, you can receive tax relief on your pension contributions. Your pension provider will automatically claim the basic rate of tax (20%) on any contributions you make. If you are a higher or additional rate tax payer then you can claim the extra tax relief on your tax return. This means for higher rate tax payers, a £100 pension contribution only costs them £60.
How much is the State Pension?
If you have been a UK taxpayer and contributed to national insurance, you will also qualify for the State Pension. The full state pension in the 2024/25 tax year is £221.20 per month. You receive the full amount is if you have 35 years of qualifying national insurance records. You can check your national insurance records on the government website.
However, it is unlikely that the State Pension income will give you enough money to have the retirement you are dreaming of so it is important that you also invest into a private pension alongside this to supplement your retirement income.
You also do not receive the State Pension until age 66 which the government are planning on raising. If you want to retire before this age, then you will need to have a sufficient private pension pot.
Kick start your retirement planning today
Self-employed individuals have several pension options available to them, allowing them to save for retirement and benefit from tax advantages while maintaining flexibility and control over their pension arrangements.
By taking proactive steps to establish your pension arrangements early wil enable you to have the retirement you are dreaming of.
A financial adviser at Four Wealth Management can help you with your retirement planning.
Book a no-obligation meeting online or call us on 0117 973 0500.
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 flexibility of a SIPP allows you to spread the risk, especially if some investments perform badly. However, these do tend to have higher costs than a standard pension and active management is essential to maximise the benefits of the wider investment choice on offer. For these reasons, they will not be suitable for everybody and generally only those who are fairly experienced at actively managing their investment should consider this type of investment.
There are strict rules on what property can be held and how.
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.
