The top 4 things self-employed workers need to know about pensions and retirement
Self-employment is a great choice for many people, but you need to take steps to plan and save for your later life. It’s important to think about how you can get the retirement you want.
1. The State Pension
A full State Pension is currently around £8,750 a year.
It is based on your National Insurance contributions throughout your life (including your Class 2 contributions when you are self-employed), so yours may be higher or lower than this. You can Check your State Pension online to find out what you could get, and when you can get it, or find out more about National Insurance contributions.
The State Pension is a good foundation, but for many people, relying on this could mean a fall in income upon retirement. Saving into a private pension, or in other ways, means you’ll be better prepared to get the retirement you want. Even if you’ve left it until later in your working life, there’s always time to start building up a pot and saving for your future.
2. Get Saving
You might be focusing on the day to day needs of your business, but it’s really important to think about the future too. The State Pension is a good foundation for when you retire, but it might not give you the income you want on its own, so think carefully about contributing to a private pension or saving in some other way.
People are living longer. A girl born in 1951 was expected to live to 82 and a boy to 77, but by 2018 this had increased to 92 and 90 respectively. Increasing life expectancy means people may have to save more to get the retirement they want, so get into the habit of saving regularly.
Even if you can only save a small amount to start, it’s amazing how your pension pot can grow. Get a personal retirement checklist to explore your saving options.
3. Keep Saving & Saving More
The Pensions Advisory Service have lots of information about your options. They can help you think about what you have saved already, how much you should try to put away, and the different ways to save.
You might already have one or more pension pots, perhaps a private pension or a workplace pension from a previous job. You may get annual statements to remind you how much you have saved. If you’ve lost track of a pension pot, then check your paperwork and try the Pensions Tracing Service to get up to date contact details.
This pension calculator from the Money Advice Service can help you understand how much you could get from your total pension pot.
We also have lots of information on our site about how to have more for your retirement.
4. Working Differently
Retirement does not have to be a finish line. You do not have to stop working just because you have reached a specific age.
For many people, working differently can be a good bridge into retirement. Staying in work means you can keep earning and keep saving too. Slowing down, working flexibly or even doing a different job could be the right thing for you. In fact, being self-employed could give you even more options to work differently.
A mid-life MOT can help you take stock of your work, wealth and wellbeing and help you plan for the retirement you want, with guidance around your skills, work and health. The Pensions Advisory Service even offer a free Midlife Review for Self Employed People.
Plan ahead to get the retirement you want.