According to a survey of 2,000 people by National Employment Savings Trust (Nest), the government-backed pensions provider, three quarters of self-employed people think it’s important to save for retirement, and over half would welcome help to do so, according to the same survey.
The first hurdle to overcome is working out how much income you might want in retirement. Financial advisers often divide this up into a series of income layers, ranging from the amount needed for basic survival up to a higher sum, which could include things like dream holidays. This sum will vary by individual. Talking to an independent pensions expert will help put a firm figure on it, though.
As a self-employed person, you have two main options when it comes to saving money into a pension scheme: the UK state pension and a private pension. The amount you can contribute might depend on how much profit you are generating and how much you are able to pay yourself.
For most people, it is worth maximising the amount of state pension they’ll qualify for. To do this you must pay Class 2, and possibly also Class 4 National Insurance contributions. Note that paying some National Insurance is mandatory, assuming profits are over the annual threshold, so in effect it is like a tax.
