Self-Employed Pensions Guide for Tradespersons

Fortunately, choosing a pension for self-employed tradesmen is not as hard as it might seem initially. Check out your self-employed pensions options and tips on how much to save each month for the pension.

self-employed pensions UK

Despite hard work building your business, self-employed individuals are less likely to have a pension. According to The Pensions Advisory Service (TPAS), less than one-third of self-employed people pay into a pension presently. 

But, we all want to retire and get out of the day-to-day grind of working for an income. And for that, a pension is necessary to ensure a financially secure future. 

Fortunately, choosing a pension for self-employed tradesmen is not as hard as it might seem initially.

Self-employed Pension Plans in the UK

A personal pension is the most popular option, but you have other options as well. Take a look and decide which one is right for you:

Personal pensions

With this option, you can choose your own provider and decide the investment plan from a wide range of funds. The pension provider claims basic-rate tax relief on your behalf that adds to your savings. 

What you get back as your pension depends on the investment and charges you pay. You have three types of personal pension choices:

  • Ordinary personal pension
  • Self-invested personal pension (SIPP)
  • Stakeholder pension 

With SIPPs, you can enjoy more investment options but at higher charges. On the other hand, the stakeholder pension plan caps the maximum charge at 1.5%.

The National Employment Savings Trust (NEST)

Though NEST is a workplace pension scheme, it is not only for people working for employers.

The NEST Corporation runs the scheme, thus involves no owners or shareholders or owners. It is run wholly for the pensioners’ benefit.

The guidance from NEST is that you can usually join if you’re self-employed or a sole director of a company that doesn’t employ anyone else. Check your eligibility for NEST today.

How Much Should You Save as Pension?

The ideal amount you should save for the pension depends on two factors:

  • How much can you afford?
  • What amount of pension do you want to retire with?

When deciding the amount, you must count how far away your retirement is. If you are young and have many years to retire, it’s fine to pay a lower percentage of your income for a pension. 

But, if you are thinking about a pension later in life, you have to save more on a monthly basis to get a good amount of retirement income.

The rule of thumb is
  • If you begin at the age of 30, then you have to save 15%. 
  • If you begin at 50, then save at least 25% of your income.

Alternatively, you can also use a pension calculator to get a better idea of the amount you must save. Also, make sure you get your taxes right to avoid money losses in long term.

Things To Look For in a Pension

To find the right pension scheme for yourself, you must first consider flexibility. If your income fluctuates, you can ideally pick a pension plan that doesn’t stick you into paying in a fixed amount on a monthly basis.

When you have many choices, choose an investment plan that makes your pot heavier, adding more to your pension amount. 

Finally, don’t forget to consider charges for self-employed pensions you choose and the convenience to monitor it.