Generally, employers now automatically enrol their employees into a workplace pension scheme, assisting their workers’ financial security for the future. However, if you’re self-employed then it’s your own responsibility to start a pension to take advantage of Pension Tax Benefits.
There has been a noticeable fall in the self-employed saving for retirement. A recent survey revealed that almost 75% of Britain’s self-employed still have no personal pension and over half of those who do, have no indication of how much is in their pension pot and what level of income this is likely to provide.
Many self-employers lack interest in the value of a pension as it may not bring out the same value as a workplace pension since there are no employers contributions.
If this is you, then you’re missing a huge opportunity, because a pension is one of the most tax efficient investments available
A personal pension can be built up by adding regular contributions or making ad hoc single payments, and your pension provider will claim tax relief and add it to your pension pot. Currently, you will get at least 20% but up to 45% in pension tax relief from the government dependent on your earnings. This effectively means that a higher rate tax payer could receive up to £16,000 in tax relief from a £40,000 annual pension contribution. New pension freedom rules mean that you’ve got more choice over how you access your pension savings when you reach retirement, including taking up to 25% as a lump sum without paying tax and also taking the whole fund as one withdrawal.
In addition to underfunded retirement plans, only a quarter of self-employed Britons have life insurance, 5% have critical illness cover and just 1% have income protection. Financial advisors facilitate the resources available and help protect many self-employed throughout their lifetime. We at SMC Financial can assist in finding good pension plans that give you access to a wide range of investments choices that can match who invest your money in a range of assets - a sensible way of managing risk and more than likely, increase your fund values.