If you're self-employed, you may feel like saving for retirement tends to slip down your priority list – especially if you're still decades away from stopping work and your income changes from month to month.
However the sooner you start saving, the better the chance you have of achieving a comfortable retirement income, and a pension can be a convenient and effective way to save.
The state pension may not be enough
Although the state pension can provide a helpful boost, it shouldn't be relied on as your sole source of income in retirement. The new full state pension is set at £155.65 per week, which for most people is not enough to live on comfortably.
You should also bear in mind that you will only be entitled to this the full state pension if you've built up 30 years of National Insurance contributions. Read our guide to State Pension for more information.
What are your options?
If you're self-employed, you won’t have the opportunity to a join a workplace pension. Instead, you will need to take charge of your own retirement savings. There are other types of pension that are available:
- Personal pension – you make regular contributions, which are invested on your behalf by the pension provider.
- Stakeholder pension – a type of personal pension that is regulated by the government, to keep minimum contributions and charges low. They can provide flexibility which many self-employed people require.
- Self-invested personal pension (SIPP) – a personal pension where you select your own investments. Only suitable for those who are confident in deciding and implementing their own investment strategy.
Whichever type of pension you choose, your pension savings will be topped up by tax relief from the government. This means that if you are a basic rate taxpayer, your pension fund will effectively grow by £100 for every £80 you contribute yourself. For more information read our guide to pension tax relief.
For bespoke advice on finding a suitable retirement saving option for your needs, speak to a financial adviser.
Last updated: 04 June 2015