Secure Your Future with a Self-Employed Pension
Plan for a comfortable retirement by exploring the benefits of a self-employed pension.
Pensions for the Self-Employed
With a business to run, planning for retirement might be the last thing on your mind. But setting some retirement goals now could really pay off in the future.
Do I need a pension?
Research by Loughborough University, on behalf of the Pensions and Lifetime Savings Association (PLSA), estimates that a couple will need an annual income of just under £17,000*, to cover their basic needs in retirement. If you hope to live a comfortable lifestyle, then you’ll need more than this.
*Source: Pension and Lifetime Savings Association/Loughborough University, Retirement Living Standards 2021
Employers are now legally required to enrol staff into a pension and make payments on their behalf, but if you’re self-employed, the responsibility to make provisions for your future may rest solely with you.
The Benefits of Having a Pension
You may be reluctant to pay into a pension if you’re planning to invest in your business, or are simply worried about short-term cash flow. However, you could be missing out on the following:
- Pension tax relief
- Flexible contributions
- Investment growth
- Flexible income
- Family security
- Combining your pensions
Pension Tax Relief
When you pay into a pension, you’ll benefit from tax relief, where the Government tops up your payment. If you pay tax at the basic rate of 20%, for every £80 you pay in, the Government will add £20 on top, and this can usually be applied to your pension automatically by the provider.
Higher rate taxpayers may be eligible for additional tax relief but will need to claim this back through self-assessment. Tax treatment depends on individual circumstances and may be subject to change in the future.
How Much Should I Pay into a Pension?
It may seem a long way off, but you should think about what you want to achieve, the type of lifestyle you want in retirement, and how you’ll fund it.
Understanding the income you need in retirement
Research commissioned by the PLSA estimates the annual income an average retired person will need in retirement, depending on the lifestyle and living standards they hope to achieve.