How to set up a pension if you are self employed

There are some big advantages to being your own boss. Being able to work where and when you want is a powerful incentive. So is knowing that the harder you work the more you can make.

But there are some disadvantages too. When it is your business, there is no pay for holidays or sickness – and worse, no employer to pay into your pension pot.

At Continuum we are looking at ways to get the pension you need if you are self-employed.

You need a pension

You may have plenty of other things to occupy your mind when you are your own boss, but even if retirement is years away, you need to start thinking about it as early as possible.

Employers are obliged to enrol their employees into a workplace pension scheme but if you’re self-employed then it’s up to you to start a pension and as a result, many self-employed people struggle to make ends meet in later life.  The maximum State Pension is currently only £179.60 a week and the State Pension age is rising.

If you are confused about pensions, contact us for some free initial help.

Fortunately, investing in a pension means some unique benefits, especially if you run your own business,

Most exciting of all is that the taxman actually helps you build your pension pot. Paying into a pensionmeans tax relief at the same rate you pay income tax. As per tax year 2021/2022 a basic rate taxpayer will need to pay in just £80 to put £100 into your pension pot. Your pension provider will get the other £20 direct from HMRC. If you are a higher rate taxpayer paying tax at the higher rate of 40% that £100 will only cost you £60, and if you are in the 45% income tax bracket, it would cost just £55.

This can help ensure that your pension is one of the most rewarding investments you will ever make. What’s more, a good pension plan will give you low-cost access to professional investment managers who invest your money for the right combination of growth and security.

But the tax advantages don’t stop there. If you run a limited company, your pension payment can be taken out of your profits as a business expense, so reducing the corporation tax you pay. You can pay into your pension instead of paying more tax.

What’s more, with the certain kinds of pension plan, you can actually invest in your own business.

When you’re ready to set up your self-employed pension, you have several different types of pensions to consider.  The government scheme NEST (National Employment Savings Trust) is now open to self-employed people, but most small business owners will look at a personal pension, a Self Invested Personal Pension (SIPP) or a stakeholder pension. One size does not fit all – there is no single best pension for self-employed people, and the best choice for you will depend upon your individual circumstances.

With many different types of pension, getting an expert on your side becomes essential.

Get an expert on your side

The current economic climate is challenging for small business owners, but remember that time really is money when it comes to pensions. The sooner you start saving into yours the better off you may be, for the simple reason that your pension pot has longer to grow.

At Continuum we have the experts you need to help you find the pension that is right for you and your business.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable retirement strategy, you should seek independent financial advice before embarking on any course of action.

A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.

The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.

The Financial Conduct Authority does not regulate taxation advice.

Book a Meeting

If you want to get a free consultation without any obligations, fill in the form below and we'll get in touch with you.

    Sign-up to our free weekly online publication

    How can we help you?
    Scan the code