My parents have just retired and are eagerly planning in more travelling and catching up with friends that they have been too busy to see in recent times. My mum also has a new car in her sights and I am sure that there will be a few other purchases along the way. My mum was in the teacher’s pension scheme and it has served her well but it got me thinking about my own self employed retirement options.
As part of generation self-employed, I don’t have a private pension and this is a cause for concern. I am not alone though and Fidelity has recently completed a fascinating piece of research into ‘Generation Self Employed’ and their attitudes towards their finances. The findings have demonstrated that nearly two-thirds of self-employed people currently have no form of pension savings – as compared to 32% of the overall population.
Becoming self-employed has given me so much freedom and I can’t imagine that I will enter the workforce and work for someone else again. My initial break from teaching was testing the water. I wanted to see if I could make a good income from my various freelance income streams. I didn’t think long term past a few years. Now though, I know I won’t go back to teaching. It is self-employment all the way for me!
Why I Don’t Have a Pension Plan
I have been considering why so many of the generation self-employed have put off their retirement options. I imagine that for many of us who are sole traders or even a small limited company we are simply too busy managing our business on a day to day basis to spend time looking further ahead to our self-employed retirement options.
My working day is short and busy. I fit in my writing and social media clients around the school day. I take my youngest daughter to school each morning and pick her up again at 3. This gives me from 9-2.30 to work on my business. I may be able to sneak in another hour or so whilst I am juggling preparing dinner and between ferrying the teenagers and Erin to various after school activities. What this doesn’t afford me, is much time to plan ahead. I am generally reactive, chasing unpaid invoices, pitching for work and responding to emails. I don’t have a huge team behind me and therefore planning ahead for my retirement or updating my will stay at the bottom of my to do list. They don’t fall off the list as I know it is important but finding the time to prioritise and take control of my financial planning is daunting.
Self Employed Retirement Options
If you are ready to take control of your financial future then it is time to make plans and prioritise your self-employed retirement options. An ISA and a Self-Invested Personal Pension (SIPP) are tax-efficient accounts that can help you save for your future. There are advantages of both approaches and Fidelity can help you get started with either.
In short, an ISA provides:
- A tax-efficient way to save your money and pay no income tax or capital gains tax on your returns.
- The annual ISA allowance for the 2019/20 tax year is £20,000, and you have until 5 April 2020 to take advantage of it.
- With a Stocks and Shares ISA you can invest your allowance in company shares, mutual funds, investment trusts and ETFs with help from our range of guidance tools.
A SIPP is different:
- A SIPP is a pension which you manage yourself. You choose what it’s invested in, how much is paid in and when.
- Contributions can be through lump sums, or regular savings plans, but you can’t normally withdraw money until the age of 55.
- The government (HMRC) will give you 20% tax relief on anything paid into a pension (up to a specific limit, depending on your circumstances).
A Final Thought
Taking control of your finances is both liberating and essential. We need to future proof ourselves and ensure that we can enjoy our retirement. We are living healthier for longer and we want to be able to enjoy retirement. If you dream of a future where you are financially secure and have the money to travel, to buy a new car or just to be able to live comfortably then you need to make your plans now. It shouldn’t be at the bottom of that list, it needs to be prioritised so that we can receive the best returns. The sooner we start our retirement planning the more money we will have in the pot.
Leave a Reply