There are more and more self-employed people every year. While this is far from bad news, it means that relying on pensions has never been more difficult. Too many business owners are delaying saving for pensions which has potentially negative effects. However, that doesn’t mean that there is no safety net at all, just that understanding pensions for the self-employed is more important than ever.
Using the National Insurance Pension
For quite a long time freelancers and self-employed people weren’t eligible for using the National Insurance. Luckily, this has changed in recent years, so practically everyone is now able to use this type of pension. This pension is payable at the age of 67, so it’s wise to make sure you’ll receive it as soon as possible. However, it can be complicated once you take deductibles, previous professional engagements, and previous employers into account. Luckily there’s a government tool that allows you to check your eligibility.
Issues with financial services
Self-employed people often have problems when it comes to things like mortgages. That’s because a sizable portion of self-employed people is being denied of their mortgage applications due to their employment status. Luckily, there are more and more brokers and financial specialists that deal exclusively with self-employed people and freelancers. On top of that, their businesses need insurance in order to best deal with difficult situations, like accidents.
Alternatives to pensions
The real issue with not having a proper pension plan is that most self-employed people lack personal insurance. The vast majority of self-employed people and freelancers aren’t covered for critical illnesses. However, even though their income might be lower than most standardly-employed persons, alternative methods like investments into property are becoming very popular. As of today, receiving pension is more economically viable for any person, although the incentives and mechanisms for alternative savings might change in the future.
Even though the state pension ranks lower than other countries, it can be a powerful tool if started using early. There are several tax breaks for different tiers, and there are even higher tax breaks if you’re a high rate taxpayer. You can access your private pension at the age of 55, but the longer you wait, the larger your pool is going to be. There are several types of personal pensions to choose from, like Ordinary, Stakeholder, and Self-invested, each with its specific mechanisms.
The National Employment Savings Trust is a