Tips for pension planning when you’re self employed

Pension Planning for Self-Employed

If you’re self-employed, pension planning can feel more challenging, especially when you don’t have regular income. However, it’s still important to think about how you can save for retirement so that you have peace of mind for the future.

There is a lot of confusion around paying into a pension if you’re self-employed, and what the best private pension for self employed individuals is.

Take action with pension saving now

You are your own boss. Which is a good thing, but it also means that nobody is going to auto-enrol you into a pension scheme.

If you’re self-employed and haven’t already started paying into a private pension, then now is the time to begin. We always start by asking our clients what they want to do in retirement and how much money they will need and work back from there. We also consider your current situation and what your monthly regular outgoings are so we can advise how much your monthly pension contributions should be.

Making meaningful contributions to your pension will require some planning and budgeting. If you aren’t able to put in, for example 10% in the first year, begin lower, and aim to increase year-on-year and make lump sum contributions whenever your cash flow increases.

Make the most of self employed pension tax relief

While you won’t be receiving employer contributions, you can make the most of the tax relief given by the government on pension contributions. If you’re self employed, your pension contributions will qualify for tax relief, which equates to the government topping up your pension contribution each time you do.

It’s worth noting that for the tax year 2024/25, there is no maximum amount you can save with tax relief, but there is a threshold.

The current annual allowance is £60,000. However, you’ll only personally get tax relief on contributions up to 100% of your earnings if your earnings are less than £60,000 or £3,600 – whichever is higher. This includes contributions from yourself, any third party as well as tax relief paid to the pension.

Don’t forget your NI contributions

The state pension is there to top up your personal pension pot investments, But remember that in order to access it, you’ll need to have paid in all the necessary National Insurance contributions.

As a self-employed person, it’s possible to build up some gaps in your NI contribution history. Any gaps in payment can affect your eligibility to receive your state pension.

Fortunately, it’s simple to find out whether you have any NI contributions outstanding and to top up your balance accordingly. The Gov.uk website will enable you to see a state pension calculation and to see any outstanding NI payments.

Speak to our expert pensions team in Derby today to determine which option is best for you. We can offer advice on pension planning and self employed retirement plans. Alternatively, find out more about our financial advice Derby services today.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Any tax relief over the basic rate is claimed via your annual tax return.