Pension suggestions for my 25 year old daughter who is self employed

20Codero

Hi

My daughter left Uni and went straight into a self employed role as a make up artist. She is now 25 and because she doesn't earn a massive amount her NI is not compulsory so she hasn't paid any. I am worried about her having no pension when she gets to my age and wonder if anyone has any suggestions where she should start. I would like to give her a bit to start her off but wont be able to give a huge sum.

Rodders53

New State Pension will need 35 years of contributions.  25+35 takes her to age 60.  Retirement age will be 67/68/??  So plenty of time to build up those NI years (under the current rules
Voluntary Class 2 NI for low-profit self employed are £3.45 a week (circa £180 per annum).  https://www.gov.uk/self-employed-national-insurance-rates

Not that state pension is enough to live on any more than less than £6,725 pa is... the point below which NI is not payable.

Get her to pursue a better paying career? or some other work in addition where NI will be paid?

TBagpuss

It would probably be sensible for her to start paying voluntary NI contributions , and to set up a private pension. Even someone who isn't warning at all can pay a couple of thousand a year into a pension - so you could gift her up to £2,880 a year to go into a pension regardless of her income. I think she's need to look at different providers to see what other rules are about minimum contributions - could she afford something like £25 a month? I think with some providers you can set up regular payments at that kind of level and while obviously it don't amount to much now, it's a long term investment, and the earlier she starts contributing the better. IF her earnings increase in future she can up the contributions she makes. 

On a wider basis, would she be able to get a part time job alongside her self employed work? that might enable her to afford to save, whether towards a pension or otherwise. 

LadyWithAPlan

Vanguard has a v low cost, great  SIPP with many low cost funds  - the initial investment is £500  and then you can add what you want - even £10 a time. The tax advantages are so worth it especially at her age.
She also should do Voluntary class 2 as discussed.

I have a friend who is a very successful makeup artist with one of the very big agencies and she makes v decent money now but it took time and she was v frugal for years. 

I have been self employed for many years and I have always had a few side hustles even when I have well paying contracts. Its harder to get booked when you are desperate.

 I suggest also thinking on some back up skills  she can do side hustles, from social media marketing, to maybe joining one of those apps where you go round and do peoples makeup for going out or do theatre makeup etc or that face painting etc  or even making other creative things as she is obviously creative. If she is in it for the long haul having side hustles really help as regular income is always needed.

I also suggest she saves an emergency fund  to cover the ups and downs of not being paid on time as often happens.  I love being SE but its definitely a harder way to live and luckily she has you to keep her focused and on a budget. 

Once she has an EF (3-6 months) I suggest an extra job in the short term to get that saved then the 15% into retirement is a great target - even if some months its less. Plus of course always track her business expenses and once she earns more  put money aside for taxes...

_Penny_Dreadful

20Codero said:

Hi

My daughter left Uni and went straight into a self employed role as a make up artist. She is now 25 and because she doesn't earn a massive amount her NI is not compulsory so she hasn't paid any. I am worried about her having no pension when she gets to my age and wonder if anyone has any suggestions where she should start. I would like to give her a bit to start her off but wont be able to give a huge sum.

It might be worth your daughter contacting the government's Money Helper service for free and impartial help to start thinking about funding her retirement.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics

As someone under 40 there a Lifetime ISA is another retirement savings vehicle available to her or she could use it to save for buying her first home.