Pension or not for the self-employed?

xahntra

Hello,

I am self-employed and a basic rate payer. My husband works full time and has a workplace pension. We are two months away to becoming debt free and are looking into our saving and investment options.

I don't know if it would be best for me to start a pension fund or just save and invest the money. I know that the tax relief is a big plus, but I don't like the fact that I won't have access to the full fund when I retire, since I will only be able to take 25% as a lump sum and then I will probably get a monthly income which until the day I die I'm sure won't reach the full amount of my fund and then it will be lost, so I don't know how much of a benefit is that tax relief in the end if I won't get to get it all.

So, considering that, would it be better to just save and invest my money and thus have full access to it when I need it and none of it will be lost when I die since I would be able to leave it as inheritance?

I'm very confused about this.

I also think the Lifetime ISA which will be launched next year could be a good option for me.

I will appreciate your suggestions on this matter.

Thanks,

Xahntra

xylophone

I won't have access to the full fund when I retire, since I will only be able to take 25% as a lump sum and then I will probably get a monthly income

You will be setting up a personal pension - https://www.moneyadviceservice.org.uk/en/articles/your-first-pension-the-options

You are permitted to take a 25% tax free lump sum - after that you may draw down the pension as best suits your circumstances. You do not have to buy an annuity.

https://www.moneyadviceservice.org.uk/en/articles/income-drawdown

dunstonh

don't know if it would be best for me to start a pension fund or just save and invest the money.

That is a bit like asking whether you should buy a car or petrol. A pension is not an investment. It is a tax wrapper for investments. So, when you say "invest the money", that is what you are doing when you use a pension wrapper.

I know that the tax relief is a big plus, but I don't like the fact that I won't have access to the full fund when I retire, since I will only be able to take 25% as a lump sum and then I will probably get a monthly income which until the day I die I'm sure won't reach the full amount of my fund and then it will be lost, so I don't know how much of a benefit is that tax relief in the end if I won't get to get it all.

Why do you think that? You are not correct. You do have access to the full fund. Plus it is not lost on death. It is passed onto a beneficiary.

I'm very confused about this.

Yes you are. I suggest you do more reading up on pensions as you are very much out of date.

I also think the Lifetime ISA which will be launched next year could be a good option for me.

The lifetime ISA is another tax wrapper. Just as the pension tax wrapper. All tax wrappers have pros and cons. However, the investments available to both will be near identical and costs the same. So, the important bit will be using the right tax wrapper (or wrappers as often the best solution is a bit of both)