What options do the self-employed have to ensure an income in retirement?
If you've made at least 10 qualifying years of National Insurance contributions or credits, one option is the state pension. The Money Advice Service website has more information on the contributions you need to pay and what you receive in return. Yet it's unlikely this retirement income alone will maintain your current lifestyle.
When considering retirement saving options, you might like to think about contributing to a self-invested personal pension, or SIPP.
With a SIPP, you can decide how much you want to save and when. For example, the Fidelity SIPP also offers the opportunity to invest in a wide range of investments, including mutual funds, shares, cash, exchange traded funds, or ETFs, and investment trusts.
Tax relief is available, so for everyone pound you contribute, the government tops it up by 20 percent, although this will depend on the amount you contribute and how much income tax you pay. And if you pay income tax at a higher rate, you can claim additional tax relief through your tax return or by contacting HMRC.
Bear in mind too that if you're self-employed through a limited company and make your pension contributions from the company, you might be able to claim corporation tax relief.
If the option of a SIPP appeals, the Fidelity SIPP is a great way to save your retirement. You can manage your investments 24/7, using our online service. And there are thousands of funds and shares to choose from to help you reach your retirement goals. There are also a number of online tools that can help you select your investments.
The good news is a SIPP might not be as large a financial commitment as you think. A regular savings plan is available, or if you prefer you can invest a minimum lump sum. As well as your own contributions, others can make payments to your SIPP - for instance, your limited company, employers or family. That's not all - you can also transfer an existing pension to your SIPP.
If you're interested in finding out more about SIPPs, why not have a look at our video? It's on our YouTube channel.
Another question you might be mulling over is how much you should contribute to your pension. This will depend on your income, your lifestyle, and retirement plans.
Setting retirement goals means you can see how much income you'd need for the retirement lifestyle you want. And online retirement calculators, such as the one we have on the Fidelity website, can help with the number crunching.
We also have another useful tool - myPlan. It provides a quick way to pinpoint progress with your pension savings. And it shows whether you're on track to achieve your retirement goals.
There's a lot to think about when you're self-employed. But it's important to look after your future self and try to be disciplined and put money aside. And it's never too early, or too late, to start.
If you're unsure about whether a pension or investment is right for you, it could be helpful to speak to an authorised financial adviser before making a decision.
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