Pension contributions for the self-employed

Pension contributions for the self-employed

For a comfortable retirement where you’re not struggling to pay bills and can enjoy frequent holidays, making regular pension contributions for the self-employed is important. Your pension pot is your future, and the more you put into it, the more you will have a prosperous life once you have left work behind.

While this is the case for everyone, making these regular pension contributions is particularly important for the self-employed.

Why are pension contributions for the self-employed important?

If you are self-employed, you will already be accustomed to having to initiate and take the lead with your career. The same is applicable when it comes to your pension. There’s nobody around to select and auto-enrol you onto a pension scheme. You won’t be receiving employer contributions. You also have to take care of all your own contributions.

It is essential that you arrange your own personal pension and begin making regular contributions – particularly if you haven’t done so already. A lot of sole traders believe they will build up their business to the point where they can simply sell this as their pension. The problem is they are often the business, so there is nothing left to sell once they exit the equation.

While you could be eligible for the State Pension, for most people, this won’t be enough to live comfortably in retirement.

Self-employed and the State Pension

Just like everyone else, you are still entitled to receive the State Pension when self-employed. You have to typically meet one of the following criteria to be eligible for a State Pension:

  • On your National Insurance record, achieve at least 10 qualifying years for any form of State Pension
  • On your National Insurance record, achieve at least 35 qualifying years for a full State Pension
  • Sadly, even the full State Pension – currently at £185.15 per week for the 2022/23 tax year – is unlikely to supply you with the type of income that allows you to live a standard of living you may have become accustomed to in your working life. This is certainly the case if you factor in rising living costs where people are struggling to pay their energy and food bills.

How pension contributions for the self-employed help

As the State Pension isn’t enough, you need to save for your retirement. The best way to do that is with a personal pension.

Self-employed pensions function in much the same way as a normal workplace pension. You place money into your pension pot over the years, and then when your reach pension age, you gain access to all the money you have saved up.

Of course, you will have built up more than just the contributions you have put in. Compound interest will see your investment continue to build and build (if investment perform well). Furthermore, you also receive tax benefits from each contribution you make. Base taxpayers get an extra 20% on top of each contribution, while those in the higher tax bracket get 40%.

Understandably, the more you put in now, the more you will be rewarded in the future. It is vital you contribute generously to ensure you have enough money for retirement. One issue is that, as you’re responsible for your pension, it can be easy to overlook making regular contributions.

Making self-employed pensions easy with iSIPP

iSIPP is the ideal solution for those with a self-employed pension. Our platform is effortless to use for everyone. You can view and manage your pension plan with ease, and that includes changing or adding to your investments. Importantly, iSIPP also helps you to avoid irregular contributions by setting up regular pension payments easily.

You might also like:

Pensions for contractors

Pension tax relief for self-employed and contractors

Pensions for the self-employed




The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

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