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        Updated: April 08, 2024

        Can You Benefit from a Workplace Pension if You’re Self-Employed?

        Self-employed and want to know more about Workplace Pensions? Have a look through this in-depth guide to find out more.

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        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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        You may have come across auto-enrolment pension schemes for employees. Employees are enrolled in workplace pensions, but if you’re self-employed, you aren’t eligible for auto-enrolment and need to look into alternative options.

        If you don’t have a pension, you may feel that you’re running up against a time bomb. Funds invested grow with compound interest, so not saving into your pension is a lost opportunity. The sooner you take control of your financial future, the harder your money will work for you and the more you’ll have to enjoy in your golden years.

        In this article, we offer information about pension options for self-employed people.

        If you’re self-employed and short on time, skip the reading and get some free bespoke advice about making suitable arrangements for a pension by speaking to one of the independent financial advisors we work with.

        Call 0808 189 0463 or make an enquiry and we’ll match you with an advisor who specialises in self-employed pension arrangements.

        Am I auto enrolled into a pension?

        If you’re self employed you won’t automatically be enrolled into a pension plan. The auto enrolment pension helps employees make pension payments and plan for retirement, but it isn’t a viable option for the self-employed.

        This is because the self employed don’t have an employer to enrol them into a pension scheme.

        But even if you would be eligible for auto enrolment into a pension scheme, it may not be the best option if you have variable income as it reduces your ability to be flexible and in control of your money and pension contributions.

        There are several good alternative options for setting up a pension as self-employed.

        We work with independent pensions experts who can help advise you on which pension would best suit your needs as self-employed. If you’d like guidance on understanding how to make your pension investments work harder for you and which pension type to get, get in touch on 0808 189 0463 or make an enquiry.

        Speak to a expert today

        Are there workplace pension schemes?

        People who are self employed don’t automatically get a workplace pension. The self-employed aren’t required by law to enrol into a workplace pension and the workplace pension scheme doesn’t apply to self employed.

        It’s down to each self-employed individual to put some plans in place to secure financial stability in retirement years.

        Can I get a government NEST pension?

        The answer is yes! The government’s National Employment Savings Trust (NEST) pension scheme was set up for the workplace auto-enrolment programme, but it also accepts people who are self-employed.

        The NEST scheme is run as a trust for the benefit of its members, and at just 0.5%, NEST pension charges are often cheaper than the personal pension alternatives.

        In most cases, you can set up a NEST pension as self-employed or as the sole director of a company without employees. But bear in mind that if you have employees, you will have different obligations and you should seek advice from a qualified professional to understand and make the most of your pension options as an employer.

        How to set up a NEST pension

        You can join NEST as a self-employed person and set up payments into your retirement pot. If you had a previous job with a NEST account before you became self-employed, you can continue to use this account as self-employed.

        Signing up to NEST is straightforward and you can do it online after answering a short questionnaire to ensure you qualify.

        Contributions into your NEST pension can be easily made by setting up a direct debit. You can pay in as much or as little as you like, starting from just £10 a month. But the annual allowance – the amount you can pay into your pension and receive tax relief on – is limited to £40,000 a year.

        Is a NEST pension worth it?

        NEST is one of the best known pension schemes in the UK, it claims to be one of the best-value schemes available for a pension. A NEST pension offers a single fee scheme, which makes understanding how much you pay in charges straightforward.

        NEST is a popular choice, but there are many good alternatives to NEST available to the self-employed.

        It’s best to compare all options on the market and to speak to an expert pensions advisor who can help you check which provider is right for you.

        Are there pension laws for self-employed people?

        While there are no specific laws on what someone who is self-employed must do to ensure they have adequate income to retire on, they won’t be auto enrolled into any sort of workplace pension. So, if you’re self-employed, it’s up to you to do your research, get expert advice, and set up a pension that suits your needs.

        At just over £8,000 a year, the State Pension is unlikely to come close to the amount you’ll need to live comfortably in your retirement.

        There are personal pensions that are purpose-built for the self-employed, and although there are other savings and investment accounts such as investment or lifetime ISAs, pensions come with tax benefits you won’t see elsewhere.

        In a pension, the government will give tax relief that’s equal to the rate of income tax you pay. This means that for basic rate taxpayers, contributing £80 will give you £100 in your pension. Higher rate tax-payers can claim more tax relief after filling out a self-assessment tax return.

        Get in touch to speak to one of the pensions experts we work with if you’d like help in finding and setting up a self-employed pension scheme that will fit in with your current situation and ensure you reach your financial goals for retirement.

        Lifetime allowance

        In any pension scheme, the lifetime allowance for your total pension value is currently at £1,055,000.

        If your pension pot exceeds this amount, you’ll usually pay extra in taxes.

        Pension income above the lifetime allowance threshold will be taxed at:

        •  55% if you take funds out as a lump sum.
        • 25% if you take it out in other forms such as pension payments or cash withdrawals.

        Although many people won’t exceed this amount in annual pension contributions, it’s important to know these factors when deciding how much to pay into your pension.

        Can I opt out of a pension?

        If you’re self employed and have unpredictable income levels and uncertainty over your future work flows, stashing your money into a fund that can only be accessed after you turn 55 could seem daunting. You may be wondering if there’s an option for opting out of a self employment pension, should the need arise.

        Under current rules, you won’t be able to access your pension funds until you turn 55. However, a Lifetime Individual Savings Account (LISA), provides a more flexible alternative for the self employed, making it possible to withdraw cash at any point and pay into it as and when you are able.

        However, early withdrawals are subject to a 25% charge, and a Lifetime ISA should usually not be used as a replacement for a pension.

        One solution recommended by many experts is to set up both an ISA and a pension – a pensions expert can advise you on which financial schemes would help you best manage your funds.

        Speak to an expert advisor

        Although there’s no auto-enrolment into a workplace pension for the self-employed, there are plenty of good alternative options.

        If you’re self-employed, you need to take initiative to set up your own pension scheme and can choose between a stakeholder pension, a Self-Invested Personal Pension (SIPP), a personal pension, or the government’s NEST pension scheme.

        A financial advisor can help you find and set up a self employment pension that’s the right match for your situation. The pension experts we work with have helped hundreds of people all over the UK successfully set up a self employment pension.

        Give us a call on 0808 189 0463 or make an enquiry today and we’ll put you through to an independent pension advisor for free, no obligation advice.

        Ask a quick question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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        Tony Stevens

        Tony Stevens

        Finance Expert

        About the author

        Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

        Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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