Pensione For Freelancers

redefinr

Hi guys,

I started working as a self-employed many years ago, and without even realising it soon I will be celebrating 10 years of freelancing!
At the very beginning, pension was the last of my thought: I was just focused on getting job, trying to make a living etc.
As years went by, business (luckly) got better, and now I really want to look after my future and start to look for the best option for me when I will need a pension.
Saving is almost impossible, between taxes, equipments and (London) rent - forget about it!
After doing some research I understood my options are:

-Ordinary personal pensions
-Stakeholder pensions
-Self-invested personal pensions
-Nest pensions

Obviously, I understand is pretty much a personal decision...but still, does anyone have some experience and advice in this field?

Also, my accountant told me if I put some of my income into a personal pension that would be considered as 'expenses' for me - is that true?

Thanks in advance

BoGoF

Your accountant needs sacking.

Are you a sole trader or Ltd company?

xylophone

Are you employed by your own limited company?

https://effective-accounting.co.uk/blog/how-beneficial-is-making-pension-contributions-through-a-limited-company/

https://www.pensionbee.com/pensions-explained/pension-types/self-employed-pensions

Dox

redefinr wrote: »

Also, my accountant told me if I put some of my income into a personal pension that would be considered as 'expenses' for me - is that true?

Why use (and pay for) an accountant whose advice you don't trust - although in this case you are right to query it. If you are self-employed, pension contributions certainly aren't a business expense; that would only be the case if you supply your services via a limited company and are an employee of that company.

gm0

I too am freelance (Ltd company version) for the past decade.

While you are subject to annual allowance rules.


A Ltd company acting as employer to director/employee can make contributions which are an offset against the company corporation tax liability in the sense that they are a cost of the business deducted from CT eligible revenues to establish the taxable profit as part of the cost of your employment income. Contribution limits and rules apply to the individual and the contribution can go to a pension vehicle of the various types you mention and this is probably the simplest approach along with employee contributions component (from eligible salary). The directors and accountant will need to set this up efficiently in terms of income, pension, dividend planning etc. and act appropriately

As an alternative there is the setup of a specific company scheme SSAS (google it) but this is more complex and of greater relevance perhaps to multi-generational businesses with more employees - such as farming families possibly. It looked unnecessary / too complex to setup and administer for a personal services "freelancer" approach. The admin associated is specialised and usually outsourced (costly) and the regulations have not been getting simpler or easier to meet in recent years.

redefinr

Im not a Ltd, I'm just a sole-trader/freelancer

Albermarle

Ordinary personal pensions
-Stakeholder pensions
-Self-invested personal pensions
-Nest pensions

From a legal/tax viewpoint they are all pensions and subject to exactly the same rules.
The differences will be with the charges and the range of funds available to invest in . It is useful to be clear that when you contribute to a pension , your money is actually invested in a fund(s) within the pension.
A SIPP has a huge range of funds available but if your are inexperienced at investing you will be better off with one of the other three.

If you are self employed whatever you contribute to your pension , then HMRC will add basic rate tax relief . So if you add £100, they add £25 to it .
There are some restrictions but if you are not planning to contribute a large part of your earnings and we are not talking about tens of thousands of Pounds a year , then they will not apply to you.

Regarding your accountant we see quite often on this forum accountants not understanding pensions.

BoGoF

redefinr wrote: »

Im not a Ltd, I'm just a sole-trader/freelancer

That being the case you cannot claim pension contributions as a business expense.

What qualifications does your 'accountant' have. That is very basic stuff he has got wrong.

SonOf

-Ordinary personal pensions
-Stakeholder pensions
-Self-invested personal pensions
-Nest pensions

Nest is a provider and not a type of pension.

Also, my accountant told me if I put some of my income into a personal pension that would be considered as 'expenses' for me - is that true?

You say you are self employed. So, that is not the case. If you were a director of a limited company then it is the case.

Im not a Ltd, I'm just a sole-trader/freelancer

In which case your accountant is wrong.

Funnily enough, a colleague spoke to me earlier in the week and said he was having a discussion with a self-employed client where the accountant said the pension was a business expense and he was telling the client it wasn't. I don't know the outcome (i.e. who the client believed).

redefinr

I'm not using that accountant anymore - but as I can see she's not the only one to have some confusion about pension :S

Back to the topic which one would be a good option for my personal pension?

SonOf

Back to the topic which one would be a good option for my personal pension?

Generally, they all do the same thing at the end of the day.

Stakeholders are good for small contributions and protect you from making mistakes.

Personal pensions are in decline but are a middle house between stakeholder and SIPPs.

SIPPs have become the main individual option for new business with the greatest options for investment but also greater knowledge required to operate (you or your adviser decides where you invest and what strategy etc).