Our reader this week is self employed, and wants to know if they need to take out a work, as well as a state, pension scheme? Carl Lamb of Almary Green provides the answers.

I'm age 42 and went self-employed in October.

I've registered to pay National Insurance to make sure I get my stamp for my state pension but do I need to take out a work pension too?

I know that company pensions are compulsory now but does that apply to the self-employed?

Almary Green Response

It's not compulsory to take out a workplace pension if you are self-employed, so you are not obliged to do so.

However, it is really important to think about building a pension pot for your retirement: your state pension will only bring up to around £8,500 per year (based on the maximum entitlement for the current tax year) which is unlikely to meet all your needs in retirement, unless you have already built up a sizeable pension pot while you were employed.

If you can afford to save even just a little every month, then it is almost always advisable to do so.

Alternatively you can make irregular contributions – perhaps once or twice a year – based on what you feel you can afford at that point.

Pensions are a really good way to save for retirement because of the tax relief that is given on your contributions.

This means that for every £8 you put into your pension, the taxman will add £2 to your pension pot.

You have two main pension routes at this point.

If you were a member of a workplace pension scheme with an employer before you became self-employed, you may be able to continue to save into that scheme, although you will no longer benefit from contributions from your former employer.

However, you may want to look at the performance and charges associated with that scheme and compare them to what is on offer elsewhere in the market.

A Personal Pension is the alternative and there are many schemes on offer with different options and benefits so it may be worth getting financial advice at this point to ensure you get a scheme that suits you.