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Self Employed Without a Pension? Here’s What You Need to Know

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As a self-employed business owner, saving for retirement may not be at the forefront of your mind. With an inconsistent income and no employer to contribute to your pension, it may seem like a luxury you can’t afford. However, planning for retirement and having a pension should be a top priority for every self-employed individual.

Unfortunately, there is a pension gap among self-employed people in the UK. According to data from the Association of Independent Professionals and the Self Employed, 15% of freelancers do not currently have a private or personal pension, and 30% indicated that they are not currently paying into their pension.

In this article, we will provide you with five essential tips to help you plan for your retirement if you are self-employed. We will cover the importance of thinking about your retirement goals, the benefits of investing even small amounts into a pension, the wide range of investment options available, the investment tools and resources at your disposal, and the importance of staying up to date with expert guidance. Let’s explore Self Employed Without a Pension? Here’s What You Need to Know.

1. Think About What You Want

When planning for retirement, it is crucial to consider what kind of retirement you envision for yourself. Start by asking yourself two key questions: What kind of retirement do you want? And how do you envision spending your days?

Consider your aspirations and goals for retirement. Do you want to travel the world, upgrade your car, or move to a new house? Additionally, think about how you want to spend your time during retirement. Would you like to continue working part-time in your business, volunteer, or take up new hobbies?

While the state pension may provide some income during retirement, it may not be sufficient to cover all your expenses and aspirations. Therefore, it is essential to assess if you are saving enough for your retirement. Use a retirement calculator to determine how much you need to save to achieve your desired lifestyle.

If you haven’t started contributing to a pension yet, don’t worry. You can open a Fidelity Self-Invested Personal Pension (SIPP), which allows you to start investing with as little as £20 a month. Fidelity has been recognized as a Which? Recommended Provider for Self-Invested Personal Pensions for three consecutive years.

2. Invest From as Little as £20

One of the misconceptions about pensions is that you need a large lump sum to start investing. However, with a Fidelity SIPP, you can begin investing with as little as £20 a month. The advantage of a SIPP is that the government contributes 20% basic rate tax relief on the total amount invested.

For example, let’s say you want to pay in a total of £25. You only need to contribute £20, and the government will contribute the remaining £5. If you are a higher rate taxpayer, you can claim even more tax relief through your tax return or by writing to HMRC.

If you already have a SIPP, remember to contribute a regular sum. Setting up a regular savings plan allows you to invest little and often, taking advantage of the power of compounding returns.

3. Explore a Wide Range of Funds and Shares

In addition to the tax benefits, a SIPP offers you a diverse selection of funds and shares to invest in. If you are unsure where to start, Fidelity’s Navigator tool can help you find a diversified fund based on your risk tolerance and investment approach. This tool simplifies the process by providing a few easy steps to guide you in making informed investment decisions.

For more experienced investors, Fidelity’s Investment Finder allows you to sort, filter, and compare a range of funds and individual shares not only from Fidelity but also from other providers. This tool provides you with the flexibility to tailor your investment portfolio to meet your specific goals and preferences.

If you’re curious about what other Fidelity customers are buying in their SIPPs, you can explore the most popular SIPP funds of the year for additional insights and inspiration.

4. Utilize Investment Tools and Resources

Fidelity provides a variety of online investment tools to help you navigate your retirement planning and investment journey. Whether you are just starting to save or want to assess the progress of your existing pension, these tools can provide valuable guidance.

If you are looking to save, Fidelity’s retirement goal calculator is a useful tool. It helps you estimate the annual income you may need during retirement and calculates the amount you need to save based on your desired lifestyle.

To evaluate if your pension is on the right track, you can use Fidelity’s pension calculator. By answering a few simple questions, you can determine if you are saving enough for a comfortable retirement.

5. Stay Informed with Expert Guidance

The world of pensions is constantly evolving, and staying up to date with the latest changes and developments is crucial. Fidelity’s saving for retirement section offers articles from experts that discuss the impact of recent changes and provide valuable insights into retirement planning.

Some of the articles worth exploring include “Autumn Statement 2023 – What It Means for Your Money,” “What Does a £1m Pension Pot Buy?,” “How Much Do You Need for a ‘Comfortable’ Retirement?,” and “The Best (and Worst) Year to Retire – Why Timing Matters.”

While articles can provide helpful information, there are times when personal financial advice may be more appropriate. If you are aged between 18 and 79 and have a minimum of £100,000 (which can include pensions), you can reach out to Fidelity’s financial advisers for assistance. The initial conversation is free, so you have nothing to lose. Simply call 0800 222 550 to speak with an adviser.

If you want to learn more about pensions for the self-employed, Fidelity offers a dedicated webpage that provides comprehensive information on the State Pension, SIPP, and the tax features associated with pensions and property. Feel empowered about your retirement and don’t hesitate to ask any burning questions you may have. Reach out to Fidelity by clicking here.

Remember, investing in your retirement is an investment in your future. By taking proactive steps now, you can secure a comfortable and fulfilling retirement as a self-employed individual.

Sources:

  • Association of Independent Professionals and the Self Employed, 18 May 2023

Important information – the value of investments and the income from them can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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