Pensions. Just mentioning the word can strike fear into the hearts of freelancers up and down the country. Because so many of the UK’s self-employed workforce don’t have a pension set up at all, and those who do, worry if it will be enough.
If you’re nodding along, the good news is you’re not alone, but things do need to change. There are over 5 million self-employed workers here in the UK, and an alarmingly high number of those do not currently save in to a pension. 43% of self-employed workers in a recent survey say they do not have a pension at all. Without the security of the same income each month compared to those on PAYE, it can be difficult for freelancers to commit paying in to a pension regularly.
Adding to this, late payments being the norm from clients can cause huge instability for sole-traders. Freelancers can be guilty of thinking short-term when it comes to finances, after all, many work on a project or short term contract basis, and would find it difficult to predict their income month to month or one year to the next.
The state pension is currently £168.60 per week and research from a wealth management company in 2018 highlighted nearly a third of self-employed workers plan to rely solely upon the state pension in their retirement. This is no where near enough to sustain a lifestyle most of us hope to enjoy and a head in the sand approach may spell disaster for our generation if we don’t change our thinking.
We get it. Thinking about the future can be further down the to-do list than fixing that broken toilet seat or cleaning your oven. But a self-employed pension can be very simple to set up and easily managed, no matter what your circumstances are. And you can in fact enjoy the same benefits as someone on payroll, as the industry and attitudes towards freelance workers are starting to shift in your favour.
How can you save for a pension as a freelancer?
- First of all, assess your day rate. This should be enough money to cover your time, quiet periods, holidays, tax, insurance and business expenses. Only then will you have money left over for your pension.
- Find a provider that offers the best deal for you. For example, Proffy in partnership with Nutmeg currently offer 12 months with no portfolio management fees, sign up here – ‘Please remember with Nutmeg your capital is at risk, Pension rules apply and T&C’s apply for this promotion.’
- In addition, if you register with Proffy here you’ll get 1.5% Cashback each year. See user agreement for criteria details.
- Make sure you combine any pensions from previous employers, in to one pot, to ensure you’re not missing out on potential future income.
- Seek the advice of a financial advisor, who will help you manage your finances and support you on a long-term basis.
- Finally, start small. Even if you pay in a minimal amount each month, you are in a better place that you were before you set your pension up. The psychology of making the leap and having a pension is a hurdle you’ve just leapt over. As you get more comfortable planning long-term, you can increase your payments accordingly.
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