Getting the right pension advice is key if your self employed want to plan for your retirement in the right way.
If you are self employed I should imagine you do not have time to trawl through pension brochures and their small print, and dare I say even pause to think about your income in retirement. Time does appear to accelerate as you get older. Personally, I cannot believe my kids have completed their summer holidays when it only seems like yesterday they were breaking up.
For most people, pensions are a dry subject but sadly they are a necessity unless you wish to literally work until you drop.
Retirement should be a time to get back your enjoyment in life and reflect on the fact that your hard graft paid off. The Government appears to talk endlessly about saving for an enjoyable retirement and seem to have a starting point for pensions for the ‘employed’ with the introduction of the National Savings Employment Trust scheme (NEST) this year which is mandatory for the employer to contribute – but what about the self employed? Are they to be overlooked once more? The reality is the State is unlikely to reward you with anything other that a Basic State pension which is currently a derisory £107.45 per week (tax year 2012/13).
What is the benefit of a Pension Plan for me?
The money that is invested by the personal pension provider grows free of the majority of taxes thus making it an efficient vehicle.
As you would expect the longer the money is invested the more probable that the returns would be favourable, although this is not guaranteed.
When you reach retirement up to twenty-five percent of the fund can be taken immediately without any tax payable. For example, this could used for further investments, recycled into the pension, a holiday of lifetime or repay a loan. The balance will pay an income to sustain a better lifestyle.
How much will a pension cost me? / What is the minimum pension contribution I can make?
Let’s not beat around the bush Pensions require contributions to work. The good news is you can claim tax relief via your self assessment at your marginal tax rate.
And, contrary to popular believe the contributions can be ‘adhoc’, rather than regular which generally suits the self employed
Some plans allow as little as £20 (net) on an adhoc basis. Starting can be the hardest part, so why not start small? And once your personal pension is in place it may become the norm for the business you earn an unexpected premium on.
What will the fund invest in?
The choice is entirely yours. There is almost an almost infinite array of different types of pension investment funds. An Independent Financial Advisor, such as Niche Advice Limited, will typically undertake analysis of your sensitivity to risk, account for timescale, and existing investments before sieving through the options to provide an assailable number of options for you to digest and make a reasoned choice.
If required, the Financial Adviser will also factor in any ‘social reasonable’ or ‘ethical requirements’ in the fund selection.
Can I Protect The Fund Once It’s Grown? Well the funds perform as expected?
The choice of funds should be reviewed at least annually and sooner if required. Within the review your risk profile should be reassessed to see if it has altered. If you want to adopt a more cautious approach then this is usually possible through ‘fund switching’ to different types of asset which are less likely to diminish in value, although it is not guaranteed.
What happens if I become Employed?
If the Employer offers an attractive company scheme then this should be considered. A full pensions review should take place with your Financial Advisor to see what your objectives are and to determine the best route for you.
If you decide to stop your contributions to your personal pension the fund should continue to grow. And, normally pension contributions can start up again as and when you choose.
Will I have to pay my Financial Advisor?
In short, almost certainly. Just like you would charge for your business they will charge for their advice.
How do I find out more / express my interest?
Please complete the Contact Form to the left of this article or call us on 02079932044.
Richard Stokes is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.
Tax advice which contains no investment element is not regulated by the FSA. Past performance is not a guide to future performance, and no guarantees are given as to capital growth or income yield. Niche Advice Limited is an Appointed Representative of Julian Harris Financial Consultants, authorised and regulated by the Financial Services Authority. FSA No: 153566 – Individual FSA No:518491. Niche Advice Limited is a Member of The Society of Will Writers. Member No: ST72070608-09.
Author: Richard Stokes
Richard Stokes is a partner at Niche Advice who are whole of the market Independent Finance Brokers In London. His role is very much focused on on Mortgage and Insurance products.