If you’re self-employed, saving into a pension can be a more difficult habit to develop than it is for people in employment. There are no employer contributions, and irregular income patterns can make regular saving difficult. But preparing for retirement is crucial for you too.
Low-cost option through your workplace
The National Employment Savings Trust (NEST) is a low-cost pension you may be able to join through your workplace or if you are self-employed. Once a member, you can carry on saving this way even if you change jobs or stop working.
Providing greater flexibility with the investments you can choose
A self-invested personal pension (SIPP) is a pension ‘wrapper’ that holds investments until you retire and start to draw a retirement income. It is a type of personal pension and works in a similar way to a standard personal pension. The main difference is that with a SIPP, you have greater flexibility with the investments you can choose.
Minimum standards if you don’t want too much choice
Stakeholder pensions are a form of Defined Contribution personal pension. They have low and flexible minimum contributions, capped charges, and a default investment strategy if you don’t want too much choice. Some employers offer them, but you can start one yourself.
A personal pension is a type of Defined Contribution (DC) pension. You choose the provider and make arrangements for your contributions to be paid. If you haven’t got a workplace pension, getting a personal pension could be a good way of saving for retirement.
A secure income for life
A Defined Benefit (DB) pension scheme is one where the amount paid to you is set using a formula based on how many years you’ve worked for your employer and the salary you’ve earned rather than the value of your investments. If you work or have worked for a large employer or in the public sector, you may have a DB pension.
With a Defined Contribution (DC) pension, you build up a pot of money that you can then use to provide an income in retirement. Unlike Defined Benefit schemes, which promise a specific income, the income you might get from a DC scheme depends on factors including the amount you pay in, the fund’s investment performance and the choices you make at retirement.
Annual and lifetime limits to consider
Tax relief means some of your money that would have gone to the Government as tax goes into your pension instead. You can put as much as you want into your pension, but there are annual and lifetime limits on how much tax relief you get on your pension contributions.
Many of Britain’s over-55s say the massive changes to retirement income announced in last year’s Budget 2014 will have no impact on them, research from Aviva’s latest Real Retirement Report shows.
The run-up to the tax year end on 5 April 2015 is the perfect time to consider tax planning opportunities and to put in place strategies to minimise tax throughout 2015/16.
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