Team Forecast • November 13, 2017
A big source of anxiety for many freelancers, regardless of what service they offer or profession they’re part of, is retirement. Naturally, you won’t benefit from lucrative employee pension contributions that many companies offer their workers, and you can’t rely on anyone else to choose your pension scheme for you. This is further compounded by the fact that during a particularly slow or less-profitable month you might simply not have the excess funds to put anything away for your pension. Consider these the trade-offs for the flexible freelance lifestyle.
Having said all this, it’s still possible to put enough money away as a freelance to enjoy a more-than-comfortable retirement. Your twilight years should be a period of great pleasure in your life, and if you adhere to the following steps you can ensure that your retirement is a comfortable one.
As you aren’t going to benefit from hefty employer contributions to your pension pot, it’s essential you prepare for the future by starting to save early. As well as giving you a larger pension once you do retire, saving early also gives you more room for maneuver if your income goes through a low period.
If you can’t afford to make any contributions one month it won’t matter as much if you began putting money away at 35, whereas not adding to your pension if you’ve only started saving at 50 can leave you with a less-than-adequate pension once you do retire. You will, of course, get the standard state pension, but this won’t be enough to live on in later life so it’s vital you begin putting money away in some form of personal pension.
Unless you’ve been working freelance for the entirety of your work life, your insurer may let you continue paying into your old employer’s pension. It may make sense to do so, but can also be extremely costly if you don’t look into it properly. Some employers will have negotiated good terms and it may be beneficial to carry on paying into it, but some plans are subject to high transfer penalties of 10% to 50% of a fund’s value, in which case it’s best to leave it.
There’s a whole host of pension options for self-employed people in the UK, each one with its respective pros and cons. The main options on the table are personal pensions, stakeholder pensions and self-invested personal pensions (SIPPs). Each one has different rates of pay and tax levels, so it’s worth consulting a professional advisor to find out which one works best with your freelance income and lifestyle.