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Self-Employed - How to make the most of your pension

If you're self-employed, here are some tips that could help you take control of your retirement.
Self-Employed - How to make the most of your Pension
Reading time: 7 mins

Many people dream of being self-employed. It offers a world of flexibility and freedom. But it can also lead to an unsteady flow of income, which can put some self-employed workers off pension planning. Sources say that only 30% of Britain's self-employed workers are saving in a pension[1]. For many, the idea of locking up your money until you're 55 years old seems unpractical, especially when you may need it sooner if work dries up. If you are one of these people, we can help you to plan ahead. While it can seem stressful to think of pensions, it’s important to plan your finances for the future. The full state pension will probably not be enough for you to live off. The maximum you’d expect to receive is £168.60 a week, meaning you’ll likely need another source of income to make your golden years comfortable. Having your own personal pension is probably much quicker, cheaper and easier than you’d think.


Are you concerned about affording retirement?
There are around 4.8 million self-employed people working in the UK today, according to the Department for Work and Pensions[2]. This is around 15% of the population. Many of these are Millennials, who seem to be turning to self-employment much more than their Gen X parents. While the number of people starting up on their own is growing, only 31% save for retirement. In fact, according to a recent study, 67% are seriously concerned about their retirement savings[3]. Here at Wealthify, we believe that everyone can have an excellent pension pot, even with unsteady income flows.


Consider opening a personal pension (or Self-Invested Personal Pension)
One solution is a Self-Invested Personal Pension or "SIPP". It’s a pension plan which offers you more control and many benefits. It gives you a 25% top-up of any money you add to your pot. Also, you won't have to any pay tax on the profits you make while your money is invested. This will apply for any money you add to the pension plan, as long as it’s less than £40,000 each year (or 100% of your earnings, whichever is lower) – this pension allowance includes contributions made by you and the government. Our expert investment managers create sophisticated and low-cost pensions here at Wealthify, called Personal Pensions.

When you’re self-employed, income can fluctuate from month to month. When clients are late paying invoices, or you lose out on work, your finances can take a hit. That’s why we’ve made a Pension Plan which lets you pay in as little as £50 a month. You'll get a carefully crafted pension plan, built around you. It’s simple to do, quick and hassle-free. Your personal pension could be just a few clicks away.

If you put in £80 of your money, you’d get £100. During the months when you have more income, you can also top-up your pension with extra money. This comes without any commitment to keep topping-up extra amounts. Your personal pension is crafted around what you can afford each month. You’ll get more control and greater flexibility over your retirement savings.


Getting a personal pension is simple and convenient
Managing the accounts, creating a website, setting up a company, advertising, networking, getting new clients, sending invoices, reminder emails, finding an office… on top of working your socks off. You’re probably pretty busy. Self-employment can take up a lot of time, often merging into your weekends and evenings. Your free moments are precious, and you don’t want to waste them. Fortunately, setting up a personal pension is hassle-free. It’s done totally online, whenever is convenient for you. You could be set up for the future and have peace of mind. All you need to do is choose how much you want to put in your pension (you can start with just £50) and select the risk level that suits you. We’ll do the rest, from building your personal pension to adjusting it, when needed, to keep it on track.


It’s not too late to get started with a personal pension
It’s true that investing generally works best over longer periods of time. This is because of something called “compounding returns”. Compounding returns means that profits reinvested back into you pension plan are adding up. And over time, your pension pot could grow in an exponential way. As your pot flourished and you have more shares, you could end up with more profit. The snowball effect of compounding returns works especially well over several decades. For example, if you were to invest £500 a month, after ten years you’d have put aside £60,000, and you could end up with £70,522[4]. This is a profit of £10,522 over ten years. If you invested £500 a month, after 50 years you’d have put in £300,000. However, you could potentially end up with around £1 million in your pension pot (£968,286[5]). This is a staggering profit of £668,286 – thanks to the impact of compounding returns over time.

Because of this, you’d probably expect to have better returns if you began paying into your pension in your twenties. However, if you want to begin in your forties or fifties, it’s certainly not too late. With ten to twenty years ahead, you could still build up a good retirement income to supplement your state pension. It’s definitely worthwhile, as you will get additional government top-ups as well as a regular income for later in life. The more you can contribute, the better retirement payments you’d expect to receive.

If you’ve worked in other companies before, you can collect all your different pension pots and pool them together into your personal pension. This could help you keep track of all your retirement money and boost your potential returns.


How can you get started?
Taking control of your retirement income is beautifully simple, quick and affordable. Just go to our Personal Pension page to get started. We’ll ask you a few questions and you’ll be able to adjust the level of risk you feel comfortable with. If you’re not planning to retire for more than ten years, you might like to consider the impact of inflation on your money. We talk about Inflation when you can buy less with the same amount of money over time. A good example is a Cadbury’s Freddo, which was famously 10p in the 1990s. Since then, the price has gone up around 2p every year, today it’s 25p. The same thing happens to your money over time, especially if it is squirrelled away for decades. What you earn in a day now, may be an hour’s work or less by the time you retire, which could make your golden years uncomfortable.

If you would prefer your pension money to be invested ethically, we can do this for you too. Our investment management team will put your money into opportunities which help the planet environmentally and socially. You’ll be given this choice, when you go through the questions.

Taking control of your retirement income has never been so simple. In just a few clicks, you can have peace of mind as a self-employer and get back to doing what you do best, managing your business.


The tax treatment depends on your individual circumstances and may be subject to change in the future.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

Working out how much you need to save in order to retire can be tricky, but luckily, our pension calculator does all the hard work for you. In four simple steps, you can get a good idea of whether you’re on track or not. Try it today and see what you could get. 


[1] https://www.theguardian.com/money/2019/jun/29/pensions-why-self-employed-people-should-mind-the-gap

[2]  https://www.gov.uk/government/organisations/department-for-work-pensions

[3] https://www.moneyadviceservice.org.uk/en/articles/pensions-for-the-self-employed

[4] This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £58,680. If markets perform better, your return could be £84,220. Values correct as of 20/01/20.

[5] This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £547,296. If markets perform better, your return could be £1,917,411. Values correct as of 20/01/20

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