Leaving teaching five years ago was great decision for my family. Since then I haven’t missed school assemblies, sports days and I haven’t had that heart-stopping panic when the children are poorly and I can’t get into work. Yet there have also been sacrifices made because I left a career that bought with it a greater sense of job security and a package of employment related benefits. I had sick pay, maternity pay and of course a teaching pension that I had voluntarily been paying into all the years that I worked part-time.
This changed as I left teaching when suddenly I was responsible for my own tax, national insurance, and future pension pot. It is a lot to get your head around initially but the Self-employed finance guide helped immensely and gave me an action plan. Educating yourself on pensions should be part of your business and is something that only 18% of freelancers are paying into. This means that 82% are not actively preparing for their old age.
A State Pension
The UK provides a state pension if you have paid National Insurance contributions. If you have paid 10 years of contributions then you will be eligible for some state pension, if you have paid in for 35 years you will receive the full state pension. The rate individuals receive will vary but the full state pension is £168.60 per week. To find out more check the State Pension page.
A Private Pension
Workplace pensions and personal or stakeholder pensions are a way of making sure you have money on top of your State Pension.
For most workplace and personal pensions, how much you get depends on:
- the amount you’ve paid in
- how well the pension fund’s investments have done
Workplace pensions are taken out of your wages and the company can also make contributions on top of what you pay. This is all recorded on your payslips.
Individuals can also take out personal or stakeholder pensions to save extra money for later in life. They can be used to top up your workplace pension. A personal pension is also really important for who are self employed do not have a workplace pension.
A Growing Workforce
I am like many others, as it is now estimated that 4.8 million people in the UK are self–employed. This means the number of self–employed workers now accounts for around 15% of the working population and is growing year on year. However only 18% of self-employed workers are paying into a pension. We are choosing this working lifestyle for the flexibility it provides, especially for working mums who are still the primary carer in the family. My blogging and writing allows me to work around my families needs. I have said on more than one occasion that as my children have become teenagers they need me even more. I am on hand to help with homework, to drive them to hockey practice and be here when they finish school. Yet this way of working also has financial implications regarding pensions.
I know that I will need more than the state pension to continue in the lifestyle I have. I have a small workplace pension (I only ever taught part-time) but I need to top this up. I imagine many self-employed people keep pushing this down there to-do list, it seems far off and rather overwhelming to sort out a pension, but it needn’t be that way.
PensionBee have busted the jargon and explained it all in this article What pension can I get if I’m self-employed. You can also watch How to sort your pension when you’re self-employed
Key Pension Saving Tips for the Self Employed
Firstly don’t put it off any longer. Take control of your finances and your future and plan ahead.
The sooner you start, the more money you will have for your retirement. Compound interest is not just something to learn in Maths and Business studies, it has a real impact on our pension savings if you act now.
Check your state pension contributions. You may understand the reason to act now and take control, especially if you have gaps like many women do. Understand and read about the Gender pension gap that I previously wrote about.
Trace your old pensions and speak to PensionBee about consolidating them into one pot.
Final Thoughts
Pensions may seem like a long way off but for many of us, we should be acting now to ensure that we can live the life that we are expecting in our older age. We live longer and healthier lives but we need to be in a position to enjoy them too!
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