Retirement planning? No

chance, I am self-employed.

‘Planning for retirement’, these three little words are often the autocue for many self-employed people to tune out.

It is a three word conversation stopper, the common bond which connects the ‘have not’s and the elephant in the room for many self-employed when it comes to longer term life financial planning.

Many feel that saving regularly into a pension is for the employed and for those who have salaries routinely paid, where a work based pension scheme is offered without requiring thought alongside the regularity of paid holidays and evenings and weekends where you switch off.

The perception of retirement planning when you are self-employed is that it can be like trying to fit a square peg into a round hole. Life just isn’t routine when you work for yourself. Investing into a rigid saving scheme which you can’t access until many years into the future can fall way down the list of priorities. It’s just not flexible enough.

In reality, retirement planning doesn’t have to be like that. Saving for the future can be straightforward as there are a range of different investment vehicles as well as pension schemes which you can select from. Even small sums, saved early and regularly enough, can create a large nest egg in the future. It is all about choices. There are different options such as Self Invested Personal Pensions (SIPP) which allow you more investment flexibility than a personal pension, such as being able to hold businesses premises you own tax efficiently within your pension wrapper.

The fact is that at retirement it doesn’t matter if you were employed or self-employed throughout your career. Unless you have saved into a pension, have investments, property or a sellable business, or are expecting a significant inheritance, you are likely to be reliant on what the state can provide in terms of a pension. No one expects you to know all the details of how your life will map out before retirement. You do however need to focus on a few general details, which can be along the lines of ‘at the age of 70 I no longer wish to be working a five day week’ or ‘I need enough money by the time I am 60 to retire completely’.

The key is to talk to someone who understands retirement planning, to find out your options and then to start saving, Wealth Planners are here to help those who want to put a financial strategy in place and guide those clients through the investment process.

Are you self-employed? Here are some reasons why you should consider retirement planning:

1. Payments into a pension reduces your taxable income. This can be useful for those who fall on the cusp of being eligible for benefits for family allowance, as a pension contribution can reduce your annual income and ensure eligibility.

2. Pension contributions benefit from tax relief at the rate of tax you pay. This means that as a basic rate tax payer every £80 you pay, the government adds £20, so you get immediate tax relief at source. If you are a high rate tax payer you can claim the additional tax relief through your tax return.

3. If you are a business owner and you have commercial property, you may be able to hold this tax efficiently inside your pension wrapper if you have a SIPP (Self Invested Personal Pension) and the funds are sufficient to do so.

4. Personal Pensions and SIPPs allow you to contribute flexible amounts, so you don’t have to commit to a rigid payment each month, you could make a single premium from your profits if that suits you better.

5. The rules have relaxed as to how you take your pension money at retirement. From April 2015, you will be able to access all of your pension money at 55 and spend, invest or turn it into an income as you wish, subject to your normal tax rate.

6. You can contribute into a pension on behalf of a spouse, child or grandchild which will also attract tax relief. This will not affect your tax bill, but can still be particularly useful when profits for a particular year peak.

If you are self-employed and would like to talk to a Wealth Planner about either starting or reviewing your current pension contributions email letstalk@sanlam.co.uk

The above article is for information purposes and should not be treated as advice. Individual circumstances should always be considered prior to purchasing any financial products. For further information contact Sanlam Private Wealth by e-mailing letstalk@sanlam.co.uk. Sanlam Private Wealth is a trading name of Sanlam Private Wealth UK Limited. Authorised and regulated by the Financial Conduct Authority.