Pension saving is generally thought of as a regular endeavour, where individuals put a set amount of money aside each month or year. However, this may present a problem to self-employed people, or those within freelance arrangements, as their income is likely to alter month on month. This often means these individuals may have to approach pension saving from a different perspective to suit their circumstances.
Express.co.uk spoke to Robert Cochran, Senior Corporate Pension Specialist at Scottish Widows, who spoke about the issue further.
Mr Cochran explained that fluctuation in income was common, but that awareness could help Britons tackle their circumstances head on.
Understanding how to manage one’s personal income, then, is key to unlocking a comfortable retirement.
He said: “While self-employment does provide added freedom, this can result in fluctuations in income.
Mr Cochran explained self-employed people and those with a varying income can manage their savings around their circumstances.
He added: “Most modern pension plans will allow a combination of regular premiums and single premiums, with the ability to stop and start premiums without a penalty.
“This means that a self-employed person could set up small, regular, manageable amounts to help them get in the good habit of making contributions towards their retirement.”
When finalising annual accounts, he explained, self-employed people can pay a one off single premium contribution as a lump sum.
This can be up to the £40,000 annual allowance which is stipulated as the limit for pension saving each year.
A lump sum payment can prove particularly useful for those who are saving towards their retirement and looking to achieve their goals in later life.
This is because it can provide a significant boost to savings, which can also increase if left to build up over a longer period of time.
The Money Advice Service, backed by the government, has also provided insight into how those with volatile income, particularly the self-employed, can save.
The service states there are around 4.8 million self-employed people in the UK, accounting for 15 percent of the workforce.
However, just 31 percent of self-employed people are saving into a pension.
This is concerning, given the valuable tax breaks, as aforementioned, that Britons can claim through pension saving.
For basic rate taxpayers, for every £100 a person pays into their pension, the government will add £25.
A personal pension is often the most used savings method for self-employed individuals, although NEST – the workplace pension scheme – can also be used.
Published at Thu, 13 Aug 2020 03:00:00 +0000