Pensions for the self-employed

Working from home has many benefits; working around the kids, choosing your working hours and meeting childcare needs to name a few – but have you ever thought about your pension?

As a self-employed person you should be paying Class 2 National Insurance Contributions (NICs) and, unless your income is very low, Class 4 NICs. This entitles you to the basic state pension. If you are employed in the basic employer\employee arrangement, your employer has a legal requirement to make contributions to your pension – this does not happen when you are self-employed, so thinking about your pension should be a priority.

According to Direct Gov (www.direct.gov.uk) a married woman is entitled to a state pension of around £58.50 per week, providing sufficient National Insurance contributions have been made. This is not very much money to ensure a happy retirement, so what are the options open to you?

There are two types of personal pension schemes, Insured Personal Pensions and Self-Invested Personal Pensions. If you have either plan you will pay income tax on your earnings before any pension contribution (this isn’t the case if you have an occupational or public service pension scheme). However, the pension provider claims the tax back from the Government for you at the basic rate of 20%. So if you pay £80 into your pension, you will end up with £100 in your pension scheme. If you pay a higher tax rate, you can claim the difference through your tax return.

If you are self-employed then a pension scheme is something you should be thinking about. The Financial Consultancy will offer independent advice on the best pension for you and your family.

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