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Pension: Self-employed workers urged to consider ‘simple’ options to fund retirement | Personal Finance | Finance

Despite more and more people working for themselves in recent years, reports from HMRC show only £830million was paid by self-employed workers into personal pensions in the financial year of 2019/2020, down from £1.15billion the year before, and the lowest on record. During an exclusive interview with, wealth manager Christine Ross discussed the disadvantages that self-employed people face due to not having auto-enrolment.

She explained it can be harder for freelancers as they are “starting from scratch”. There is not an employer to pay money into someone’s pension or match their contributions.

However, Ms Ross also stated alternative pensions that people may decide to pay into. Lesser-known vehicles may suit sometimes situation better than other personal pensions available.

It could be possible that some freelancers struggle to pay into pensions due to lack of knowledge of what is out there, she suggested.

She said: “Those people who don’t have access to an employer scheme should probably get a stake holder pension scheme.

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“I don’t hear it as much now, but around 2001, the Government brought out a standard for pensions that would have a charges cap and they weren’t allowed to have nasty penalties for anything.”

A stakeholder pension is a type of defined contribution pension, which has a retirement value based on the amount someone pays in and how their investments perform over time.

They are arranged by a contract between an individual and their pension provider and must adhere to strict Government conditions.

Anyone can invest in a stakeholder pension whether they are in permanent work, self-employed or unemployed.


She continued: “When my clients talk to me about their children who just started out saving for retirement or they’re self-employed, or maybe they’re in an employer scheme, but they can only put in so much or there’s no matching available for them, I’d say just get a very simple scheme to start with.

“Maybe something with a tracker fund because all you need to do is outset, unless you have a real interest in stock markets, and you’re knowledgeable.

“All you really need to do is get some money into that scheme and start it growing.

“I’d keep it very low cost, very simple. It’s a case of starting somewhere and building something up.”

Any UK pension that people transfer into a stakeholder pension has to be accepted without any additional charges.

Stakeholder pension plans must have a minimum gross contribution of £20 or less, whether contributions are made regularly or as one-offs.

They also have to offer flexibility, and people can stop or restart them at any time without incurring a penalty.

Additionally, if people don’t want to choose how their pension is invested there must be a default fund available for them to invest in.

This should have a life styling option, which automatically moves people’s money to lower risk investments as they approach retirement.

Ms Ross added: “When you build up some funds, or some critical mass in your scheme, as time goes on, maybe you want to work with an advisor, maybe you have a knowledge of markets yourself, it might be appropriate to switch into a scheme with more options.

“But for most people it’s just a case of building up some money in the scheme to start with.”

Like all defined contribution pensions, people are able to withdraw the funds in their stakeholder pension from the age of 55 (57 from 2028).

People can take up to 25 percent as a tax-free lump sum and either withdraw the remaining 75 percent, use it to purchase an annuity, keep it invested via drawdown or delay drawing it altogether.


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