Ask the Expert: I am self-employed so what can I do about a pension?
PUBLISHED: 11:01 23 March 2018 | UPDATED: 11:01 23 March 2018
I've recently set myself up as a self-employed window-cleaner.
My wife isn’t working at the moment as our children are still small but expects to go back to work when they go to school, so she won’t be able to pay into a pension for a few years. I know that people who are employed have to join a pension scheme through their work, but are there any rules about what the self-employed need to do?
Response from Carl Lamb of Almary Green.
As a self-employed person, you are not required to pay into a pension scheme – but of course, it is always good to start saving for your retirement as early as possible.
The most common route for a self-employed person is a personal pension.
You pay contributions into the pension fund, these are invested for you and the fund will hopefully grow over the course of the years.
The important thing about pensions is that you get tax relief on any contributions so for every £8 you put into the fund, you will get £2 added to the pot by the government (if you are a basic rate taxpayer).
Choosing where to put your pension contributions is not so easy: there is a huge range of pension providers and each provider will have a wide range of funds into which you can put your money.
An independent financial adviser can help you choose the right provider and funds, but they will charge a fee for the advice.
It’s important that you invest in funds that are suitable for your attitude to risk.
It’s also sensible to review your pension arrangements regularly – ideally at least once a year – to make sure that the funds you have selected are still suitable for you and performing as well as hoped. You can make your pension contributions either regularly throughout the year – monthly, perhaps – or just make one single contribution when you’ve assessed how much you can afford to pay in.
Your wife can actually have a pension scheme and make contributions of up to £3,600 per year even if she isn’t earning enough to pay tax (or earning at all) and she’ll get the tax relief on what she’s put in.
Carl Lamb is managing director of Almary Green.