Tips for a Decade-Long Freelancer on Pension Saving:
Running your own business brings financial freedom, but it also means taking on more responsibility. Pension saving often falls by the wayside, but it shouldn't. Self-employed folks may struggle with affordability and not knowing where to begin, according to PensionBee research.
Many freelancers miss out on auto-enrolment, unlike those employed by companies. But it's not all doom and gloom – self-employed individuals have the power to take control of their retirement savings.
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If you are one of the 30 million employees with a company, you'll be automatically enrolled in a pension and contributing to your retirement savings right out of your paycheck. Unfortunately, the 4.4 million self-employed people in the UK don't have this support. It's up to us to find the time to manage our own pensions.
PensionBee advocates for pension reforms that make retirement savings more accessible to all. But there's no need to wait for change.
My Top Tips for Freelancers
- Start small: You can put in as little or as much as you want, and platforms might let you start with just £100 or even a £20 monthly savings plan.
- Focus on the tax benefits: Contributions lower your tax bill, even if it means taking home less each month. If you run a limited company, pension payments can be considered business expenses.
- Set up a direct debit: This ensures regular contributions and makes forgetting about the payments easier, helping you build retirement savings without notice.
- Consider using a financial adviser: It's possible to manage a Self-Invested Personal Pension (SIPP) yourself, but it can be time-consuming for busy freelancers. You might prefer to pay a bit extra to use a financial planner who sets up the pension properly, discusses how much you can afford to contribute, and offers regular portfolio reviews.
- Don't waste excess funds: If you have a good financial year, consider putting the extra funds into your pension to reduce your tax bill and boost your savings. An accountant can help you forecast your leftover funds each year.
- Ignore the noise: It can be tempting to reduce pension contributions during uncertain times, but these are also great opportunities for investing. Try to avoid making rash decisions based on short-term market fluctuations.
Remember, your future self will thank you. While pension savings Advice for the self-employed may not be as straightforward as it is for traditional employees, taking control and contributing regularly can help alleviate that anxiety.
- Despite the challenges, self-employed individuals can take charge of their retirement savings, even if they miss out on auto-enrolment.
- A strategy for freelancers managing their own pensions could involve starting small, focusing on tax benefits, setting up a direct debit, considering a financial adviser, and prioritizing excess funds into their pension.
- It's essential for self-employed individuals to consider pension saving, as it can alleviate future financial anxiety and help ensure a secure retirement, even though the process may be less straightforward than for traditionally employed individuals.
