pexels photo8

Self-employment is the talk of right now, but with political uncertainty setting on the horizon, how could this affect the future of self-employment? Chancellor Philip Hammond recently attempted a tax raid on the self-employed, after announcing a rise in Class 4 NIC, which was later scrapped.

Laying the negativity aside, self-employment opens up a plethora of opportunities, and it’s typically higher paid than traditional employment due to the flexible working style.

There are saving hacks you can follow to help cushion your fall if you were to experience a gap in contracts, but how about a pension fund? We explore how a self-employed professional could comfortably save towards a war chest, whilst contributing towards a pension pot.

37% have no pension

IPSE, Association of Independent Professionals and the Self-Employed, recently released their 2017 general election manifesto, A Contract with the Self-Employed. The manifesto lays out how the newly elected government should support the self-employed who make up 15% of the British workforce.

Research released by IPSE found that 37% of IPSE members do not have a pension, while 16% do not save for retirement at all.

Pensions Expert brings to light the need for incentivised pension structures for the self-employed, as without this, the future could be bleak and financially unstable for flexible workers.

As a traditional employee, you would be entitled to the workplace pension scheme which requires a percentage of your pay to be put into a pension pot, usually arranged by the employer. The employer would then contribute a fixed percentage of funds into the pension pot, and tax relief may also be available.

This incentive is a key factor which encourages permanent workers to save into a pension, but what’s on offer for the self-employed?

State Pension

As a self-employed professional, you will be eligible to the State Pension in the same way as anyone else, but your employer will not be required to contribute.

The Money Advice Service have said that there are 4.5 million self-employed professionals in the UK, yet the number of self-employed people saving into a pension has halved.

IPSE have suggested that the government should conduct a review to “explore auto-enrolment and a portable benefits system,” as an incentive which may encourage the self-employed to save into a pension.

“This review should consider the design of a self-employed pension which allows temporary drawdown to cover fallow periods of work, with the drawdown being tax-free if repaid in full within 24 months.”

As a Contractor or Freelancer, building up funds may prove difficult due to the irregular income pattern and operational costs incurred, but if an appropriate incentive was available, as suggested by IPSE, more self-employed workers could be encouraged to save into a pension.

At Gorilla Accounting, we work with various specialist pensions providers to deliver regulated pensions advice. For more information, ask a member of our New Business team on 0330 024 0406.

We offer anall-inclusive accountancypackage for Contractors and Freelancers for just £85 plus vat per month. If you have any questions, get in touch with a member of our New Business Team by calling 0330 024 0406 or