A pension is a great way to save for your future but when you are self-employed it is increasingly difficult to contribute towards a pension.
With no employer contributions and the irregular incomes that you face as a result of the nature of your work, paying towards a pension can be more difficult than you may think and for some people it can become a bit of an afterthought and they fail to consider it as much as they should.
Despite this, it is still imperative that you think about your options when it comes to pensions and consider how you can start saving for the future.
These are the reasons why a pension is an absolute must for freelancers.
While you are entitled to a state pension when you are self-employed, it’s likely that this won’t be enough to sustain you. At present, the state pension is set at around £155 a week, which is a modest figure when you consider what all of your outgoings are likely to be. If you want to have a more substantial figure than this for when you retire, it is probably an idea to start thinking about saving into a personal pension.
Personal pensions allow you to take 25 percent of your savings as a lump sum completely tax-free, so it’s worth considering if you want more money for when you can no longer work.
If you receive child benefits, paying into a pension may help you to retain this payout. This is because the figure the taxman uses to see if you are affected is not the amount you are actually paid. Instead, he uses a little-known calculation called your ‘net adjusted salary’.
While you may just be thinking about how your pension can benefit you, it’s important to recognize that a pension is actually beneficial for the entire economy in the UK. The money that you put into a pension is often held in giant pension funds, which in turn use your cash to invest in companies. This means that businesses are able to grow and develop because they have access to more funding.