Self-employment plays a vital role towards the UK\u2019s economy. In recent years the number of people who are self-employed has risen steadily. But one of the main drawbacks is that the self-employed do not have the advantage of an employer to help arrange pension provision.<\/p>\n
At a time of rapid technological advances and societal changes, the increasing prevalence of the self-employed not only represents a change in how people work, it also calls for changes in how people save, invest and plan for retirement.<\/p>\n
Last year, the coronavirus (COVID-19) pandemic forced even more Britons to become their own bosses. More than 5 million people are now registered as self-employed in the UK, up from 3.2 million in 2000[1]. The self-employed account for 15% of the UK workforce. Yet just 31% of the self-employed are saving into a pension. 67% of self-employed people are seriously concerned about saving for later life[2].<\/p>\n
Even if retirement seems a way off, there\u2019s no escaping the fact that we\u2019re going to need to fund it somehow. \u2018Being your own boss has many attractions, but unfortunately it won\u2019t stop us from getting old.\u2019<\/p>\n
It\u2019s perhaps no coincidence that only 31% of self-employed people pay into a pension[3], compared with 84% of employees eligible for a workplace pension[4], creating a situation that the Association of Independent Professionals and the Self-Employed (IPSE) is calling a pensions crisis.<\/p>\n
And with the fastest growth in self-employment among the over 45s[5], how to fund retirement is a question that many will have to face up to sooner rather than later.<\/p>\n
There are certainly other savings and investment accounts you can use to save for your retirement, but the fact is that pensions are built for the job and come with tax benefits that you won\u2019t get elsewhere.<\/p>\n
With pensions, the government gives tax relief equal to the highest rate of tax that you pay. So if you\u2019re a basic rate taxpayer, you only need to contribute \u00a380 to end up with \u00a3100 in your pension pot. And if you\u2019re a higher rate or additional rate taxpayer, you can claim back even more tax relief when you fill out your self-assessment tax return.<\/p>\n
It\u2019s worth noting that there\u2019s an annual allowance which limits how much can be paid into your pension each year while still receiving tax relief. It\u2019s based on your earnings and is currently capped at \u00a340,000.<\/p>\n
Exactly how much you should pay into your pension depends on how soon you start. The earlier you begin, the less you\u2019ll have to put away every month to afford a comfortable retirement. Starting late? You\u2019ll need to save more.<\/p>\n
Here\u2019s what to do when you don\u2019t know where to start.<\/p>\n
When it comes to pensions, it pays to be an early bird. The sooner you start paying in, the more tax relief you\u2019ll get from the government, and the more time your money has to potentially grow.<\/p>\n
The thought of saving a large lump sum to pay into your pension can be daunting. Getting into the habit of saving for your future is half the battle for many people \u2013 so pay in what you can regularly.<\/p>\n
If your earnings increase or you secure a\u00a0 <\/span>new contract, consider increasing your regular payments or paying a lump sum into your pension.<\/p>\n If retirement is still a way off, it can be hard to think of your future self and no longer working. So instead, visualise the dreams and goals you\u2019d like to pursue when you finish working. Thinking about the positive benefits of saving can be a good motivational tool.<\/p>\n Once every six months, take a look at your pension and consider whether you\u2019re on track to save enough. Just remember that, as with any investment, the value of your pension can go down as well as up, and you may not get back as much as has been invested.<\/p>\n It can be harder to think about saving for retirement if you\u2019re self-employed and don\u2019t have access to a company pension scheme, but pensions shouldn’t be ignored and offer valuable tax benefits. To find out more, or to discuss your situation, please talk to us.<\/p>\n Source data:<\/b><\/p>\n [1] 1 https:\/\/www.ons.gov.uk\/employmentandlabourmarket\/peopleinwork\/employmentandemployeetypes\/articles\/coronavirusandselfemploymentintheuk\/2020-04-24<\/p>\n [2] The Association of Independent Professionals and the Self-Employed 2020<\/p>\n [3] https:\/\/www.ipse.co.uk\/uploads\/assets\/uploaded\/de9c9fad-459a-4afa-96e85116aad25641.pdf<\/p>\n [4] https:\/\/assets.publishing.service.gov.uk\/government\/uploads\/system\/uploads\/attachment_data\/file\/712812\/workplace-pension-participation-and-saving-trends-2007-2017.pdf<\/p>\n [5] https:\/\/www.ons.gov.uk\/employmentandlabourmarket\/peopleinwork\/employmentandemployeetypes\/adhocs\/008728selfemploymentbyage2001to2017<\/p>\n","protected":false},"excerpt":{"rendered":" Changes in how people save, invest and plan for retirement Self-employment plays a vital role towards the UK\u2019s economy. In recent years the number of people who are self-employed has risen steadily. But one of the main drawbacks is that the self-employed do not have the advantage of an employer to help arrange pension provision.<\/p>\n","protected":false},"author":1,"featured_media":394,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/posts\/393"}],"collection":[{"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/comments?post=393"}],"version-history":[{"count":1,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/posts\/393\/revisions"}],"predecessor-version":[{"id":395,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/posts\/393\/revisions\/395"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/media\/394"}],"wp:attachment":[{"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/media?parent=393"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/categories?post=393"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.a1-financial.com\/blog\/wp-json\/wp\/v2\/tags?post=393"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}4. Visualise your future<\/b><\/h4>\n
5. Have a regular review<\/b><\/h4>\n
Need a hand with your retirement plans?<\/b><\/h3>\n