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Self employment and pensions

Self employment and pensions – everything you need to know

If you’re planning on registering as self employed, you may be wondering how your decision will affect your pension and retirement plans. In this section of our self employment guide, we’ll take you through the various pension options available to you, including the government state pension and private pension schemes.

Self employed pension fund for new business owners – state pensions

As a new business owner you may think you no longer qualify for a state pension. Fortunately this isn’t always the case.

How does it work? The state pension is available to anyone with 30 qualifying years or more of National Insurance contributions.

How can I claim my pension? You can apply for your state pension through the Government’s official website. You’ll also be able to calculate the age that you’ll start receiving your pension.

Self employed pension fund for new business owners – private pensions

While you may still qualify for a state pension it’s best not to rely on this alone as a retirement fund. Instead it’s recommended that you start paying into a private pension fund. You can set up a self employed pension fund through your bank or through another pension provider.

There are several main differences between the state pension and your own private pension. For instance, you can only receive state pension payments when you reach a certain age. On the other hand, you can often take funds from your private pension from the age of 55. Recent legislation has also given people more freedom to receive the full amount or a large lump sum from your pension. This is ideal if you’re looking to retire early.

Which self employed pension funds are available to me?

There are numerous private pension providers out there; there are also a number of ways you can choose to invest your pension. Stakeholder pensions are just one of many private pension funds you could benefit from.

What is a stakeholder pension? You can pay into a stakeholder pension through your bank or another pension provider. Your pension provider will in turn invest your sum in shares depending on your attitude towards risk. You’ll find more information on these funds below.

Another option is to invest in an SSAS pension scheme (small self-administered scheme) or SIPP fund (self-invested personal pension).

What is an SASS pension fund? A SASS pension fund is generally used as a pension scheme for a group of directors, board members or other key members of staff. You may pay into a SASS fund along with other staff members.

You’ll also have the chance to invest the money more freely. For instance you may use your fund to purchase your business premises.

What is a SIPP pension fund? A SIPP pension fund differs slightly. This type of pension allow you to invest your money into a number of investment opportunities, which have been approved by HMRC.

Some SIPP funds cost more to set up so it’s worth doing your research into which providers offer the best scheme for your needs.

Overall, both pensions are ideally suited to small business owners as they give you more power to invest your pension. If you’d like to go down the investment route there are several pensions out there tailored to different levels of risk. These levels of risk can be categorised into a number of different funds, including ‘low risk’, ‘medium risk’ and ‘high risk.’

What is a Shariah-compliant pension fund? If you’re of particular religious beliefs, you may wish to invest in what is known as a Shariah-compliant fund.

These allow you to invest your money in ethical funds that are accepted under Shariah law. For instance, your money won’t be invested into companies that are involved in the sale and production of alcohol.

Passing on a self employed business when retiring

Wondering how to pass on a self employed business when you retire? Depending on your situation, passing on your business can be simple. However it’s worth planning far in advance to ensure your business transition goes smoothly.

The first thing you’ll want to work out is who will inherit your business when you retire. Will you opt for a family member, a shareholder or sell your company outright in a trade deal? Of course, when you sell any business, there are a number of legal processes that you will need to undertake.

It’s worth having a solicitor or adviser on hand to guide you through the legalities of passing on your business, including written contracts, paperwork and other important documents. During this time, you may decide to stay on as an adviser; shareholder or director in your business, meaning you may still receive profits from your company. Our experienced business advisers and delivery partners have a wealth of knowledge around all subjects, including the sale of your business when you retire.

How can Start Up Loans help with my retirement options?

Here at the Start Up Loans Company we provide the funding needed for you to get your business up and running. We offer personal loans for business purposes (fixed rate interest of 6% per annum), as well as expert business mentoring and advice. If you have a question about retiring or accessing your pension when you’re self employed, we can help.


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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

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