The Finance Zone | Self Employed Pensions | Abbey Life Personal Pension Planning |
The self employed rapidly becoming marginal in the world of pensions , under-provisioned and not seen by most recent governments and political parties, many it seems will arrive at pensionable age with very little income..
There are a couple of issues facing the self employed face when building up a retirement pot.
They are entitled only to the Basic State Pension, whereas employees manage to obtain both the Basic State Pension and an additional earnings related scheme now known as the State Second Pension (it was known as SERPs). The overall limit is capped at £151 per week (2008/09 Tax Year), which is equal to just over £7,800 a year.
Today (December 2009)the Basic State Pension is currently £95.25 per week or £4,953 per year. This is somewhat below poverty line levels and whilst anyone without private savings would be eligible for Pension Credit (provided of course this remains in place) which would take their income up to £130 a week (£6,760 per year) this is still not going to provide any kind of standard of living to aspire to. So the state isn’t giving much to the self employed and is only giving a little more to the employed).
Another issue they face is that by definition they don’t have an employer’s pension scheme on offer. In company pensions the contribution rates are typically split two thirds from the employer and one third from the employee, so the absence of an employer contribution makes a big difference. When it comes to contributions to private pensions, the self employed are lagging behind again. Even the attitude from the UK treasury via the Inland Revenue seems to be against the Self Employed.
The final outcome is that the lack of state or employer pension support means that the self employed are at risk of spending retirement with very little there is also a more than outside chance that they will be working long than planed.
For many self employed there is the option of selling the business at retirement and the cash from sale making up for the shortfall in conventional pension planning, however try selling a local firm of Plumber’s or Electricians and you will find the world not really being that interested. The same also applies to Freelance Journalists and a range of other occupations.
One of the first rules of investment planning is of course not to put all of your eggs in one basket and of course this applies to your business along with conventional stocks and shares.
I strongly recommend in the first instance you consider carefully the level of state support in relation to your Pension, and you can do this here.
You do have some choices, and planning is of course needed sooner rather than later.
In the first instance a review of your existing plans will be the starting point, and then some further reviews of the rest of your business planning and the making of a Retirement Plan in order to ensure your retirement is financially sound will be the best way forward.
Richard Smith
0845 226 9106
Related Links
Abbey Life Personal Pension Reviews
