Now that you’ve read all about how self-employed people can get a pension and plan for retirement, it’s time to put that into action. Here’s five tips for managing your pension when you’re self-employed…

 

1. Start saving as soon as possible!

When it comes to how much you should regularly contribute to your pension, the phrase ‘something is better than nothing’ rings true. Even small savings now could make a big difference to your retirement savings, thanks to the magic of compounding.

For example, let’s say you started contributing £100 a month into a pension from the age of 25. After 40 years at an annual growth rate of 5%, the £48,000 you invested could be worth £130,000 after fees (assumed 0.6% per year).
However, if you delay that investment by 20 years and start when you’re 45, the picture looks less rosy. Even if you doubled your monthly amount to £200, the £48,000 you invested could be worth just £76,000 by the time you reached 65.
It’s worthwhile putting whatever you can afford aside as soon as possible to get a head start on growing a healthy pension pot.

The figures above are assumptions and are not guaranteed. As with all investing, the value of your pension can go up and down, and you may get back less than you invest. Payments you make into your pension won’t be accessible until the minimum pension age (currently 55 increasing to 57 in 2028). Tax treatment on your pension contributions depends on individual circumstances and is subject to change.

 

2. Find and combine old pension pots

While you won’t have a workplace pension as a self-employed worker, you could have old workplace pension pots you might want to consolidate.

Auto-enrollment is a government initiative introduced in 2012 in an effort to get more people planning for life after work. The scheme means UK workers under employment are automatically enrolled into a workplace pension scheme, so if you’ve been employed by a business in the past 10 years there’s a chance you may have one or more old workplace pensions.

It can be difficult to keep track of multiple pension schemes, so you may want to consider consolidating them into one easy-to-manage personal pension. A Moneybox Pension allows you to:

  • See exactly how much money you have alongside your other saving and investing accounts
  • Benefit from tax relief on your contributions in the form of 25% top-ups
  • Gain greater control over your pension and choose where it’s invested
  • Contribute however much you want, when you want

If you’re not sure if you have an old workplace pension, simply enter the name of your former employer and the years you worked there into our in-app Pension Provider Search Tool to find the details.

When deciding whether to transfer your pension, it’s important to compare the charges, investment options & benefits between Moneybox and your old provider. Moneybox cannot accept a transfer from a pension your employer is currently paying into.
If you’re not sure whether the Moneybox Pension is right for you, you may want to contact a suitably qualified financial adviser for help.

 

3. Find a way of saving that works for you

We can all agree that saving and investing for the future is important, but we understand that sometimes it doesn’t feel so simple. As a self-employed worker, extra obstacles, such as moving paydays or inconsistent income, can make it more difficult to contribute to your pension consistently.

Everybody has a unique set of circumstances and not everyone likes to save in the same way. Finding what works best for you and your current situation through a little trial and error is a good place to start.

Luckily, there are lots of ways to contribute to a Moneybox Pension. You could choose to ‘set and forget’ a weekly deposit, which collects a set amount of money each week, or a payday boost, which collects a set amount each month – just sit back and watch the coins stack up. 💰

If you need a little more ✨ flexibility ✨ you may prefer to make one-off deposits as and when you have spare funds to add. Maybe you’re not in a position to contribute any set amount regularly but want to get started on growing your pension pots, in which case you could use our OG round-ups tool, which allows you to round up your everyday purchases to the nearest pound and invest the change into your pension.

 

4. Review your contributions regularly

It’s good practice that everyone reviews and adjusts their pension savings at least annually, but it’s especially important for those in self-employment, whose earnings may not be consistent.

While it may be tempting to spend any surplus cash during periods where you’re earning more, it’s wise to consider increasing your pension contributions instead. Not only will this help compensate for periods where you earn less and need to lower your contributions, but it could also be a prime opportunity to benefit from higher tax relief.

Higher and additional rate taxpayers can be eligible to receive 40% or 45% pension tax relief, respectively. This means that if a higher rate taxpayer were to add £80 to their pension, they could receive £20 in pension tax relief which would take their contribution to £100. Then they could claim higher rate tax relief to receive an additional £20, reducing the cost of their £100 contribution to £60.

With a Moneybox Pension, we’ll claim the basic 25% pension tax relief for you but you’ll have to file a HMRC self-assessment tax return to claim any additional pension tax relief.

Don’t forget – pension contributions benefit from pension tax relief and compound interest too, so it may be worthwhile considering contributing to your pension at times when you’re paying a higher or additional tax rate.

5. Track your progress regularly

Now you’ve completed your pension MOT, all that’s left to do is to keep reviewing your pension against your personal circumstances.

You can use our handy Pension Calculator to track your progress and find out your projected pension savings. The tool uses a few details, including your current savings, salary and your target pension pot, and can also work out how much you need to save to reach your target pension pot and adjust your pension contributions accordingly.

 

How does the Moneybox Pension work?

In addition to a workplace pension, a personal pension is a great way to grow a healthy pension pot. With the Moneybox Pension, you can:

  • Track down and combine your old workplace pensions into one personal pension, with the help of our trusty Pension Detectives 🔍
  • Get a free 25% bonus from the government on your contributions. So for every £4 you save, the government will contribute £1 (Pension and Tax rules apply) 💰
  • Save as much or as little as you like, whenever and as often as you like with weekly deposits, monthly payday-boosts, one-off deposits or round-ups ✔️
  • Track the performance of your investment 24/7 in the app 📲

 

Explore the Moneybox Pension

 

As with all investing, the value of your pension can go up and down, and you may get back less than you invest. Tax treatment on your pension contributions depends on individual circumstances and is subject to change. Payments you make into your pension won’t be accessible until the minimum pension age (currently 55 increasing to 57 in 2028). We do not currently offer drawdown products (for the Moneybox Pension).

When deciding whether to transfer your pension, it’s important to compare the charges, investment options & benefits between Moneybox and your old provider. Moneybox cannot accept a transfer from a pension your employer is currently paying into.

If you’re not sure whether the Moneybox Pension is right for you, you may want to contact a suitably qualified financial adviser for help.