Pension

Art2

Hello,
wanted some advice, please.
Person, 32, not paid into pension since about 2024, got own business from then.
Has £2,615 Scottish widows
£3,880 People's pension
£1,773 Nest account.

Should the amounts all be put into one?
Which one would be the best?
The minimum should be putting into pension monthly? 

Thank you for any advice, am trying to help someone. Who this hasn't really been their priority.

Brie

How big is the business?  Can it afford to be paying in to a pension for this "employee"?  How much to put in will depend on what the business can afford as well as what the individual can afford.  

Those are 3 very small pots of money so consolidating will make life easier.  You/they will need to check what the fees are for each to see if they can get the best value.  

Also suggest that they check their state pension forecast.  It will help them realise what they might need to live on if they don't deal with their own pension as well.  

Billxx

The rule of thumb for contributing to pensions used to be a percentage of your income based on half your age.  So at age 32 your contributions (company and personal) should be 16% of pre tax income.

It's a very old idea so I am not sure if it still applies these days.

Others will have more informed opinions.

xylophone

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/pensions-for-self-employed-people

dunstonh

The minimum should be putting into pension monthly? 

The minimum is zero.  However, that isn't the way to look at retirement planning.

got own business from then.

That suggests limited company.  Is that the case?  (it makes a difference on how you pay into the pension if the person uses limited company, partnership or sole trader basis.  So, the method needs to be known.

QrizB

Brie said:

Those are 3 very small pots of money so consolidating will make life easier.  You/they will need to check what the fees are for each to see if they can get the best value.  

I agree with the above; those are very small pots. However if you're only 32 you have 35 years to fix things.

Billxx said:

The rule of thumb for contributing to pensions used to be a percentage of your income based on half your age.  So at age 32 your contributions (company and personal) should be 16% of pre tax income.
It's a very old idea so I am not sure if it still applies these days.

I'd say it's a good place to start.

If OP has an annual income of £30k, that would be £4800 a year (£400 a month) to be paid into their pension.

Art2

Hello, thanks you all for your replies.
Checking what state pension would be is good.
"Those are very small pots" is what have been trying to put across. 30k is about right so 400 a month, the 16% suggested is good.
It is a window cleaner business, just the one person, not sure is limited or sole trader, sorry.  Not entirely up on all this information so wanted to check and put all this information to them.
Putting the pots together is what I was thinking, as put above would make life easier.
The business has been on the go roughly over a year.
Thank you for the link also and appreciate everyone taking time to help.  Thank you.

SVaz

As mentioned up thread,  Ltd. Company or Sole trader?

Secret2ndAccount

I think if you had created a limited company, created shares and registered it, you would probably know. So it is likely you are a sole trader (you are the business). You need to tell HMRC you are a sole trader if you have not already done so. Your profits will be like your salary - it's your money and you are taxed on it as such.
If the business was to get a bit bigger, you could consider turning it into a limited company. Then you would have options like retaining profits within the business, and deciding when to pay yourself. You could pay dividends on the company shares (lower tax rate on dividends). You could have the company pay into your pension for you. At 30k it's probably not worth all the hassle of setting it up, so you stay as a sole trader.
Getting off the topic of pensions, there is another advantage to a limited company. It keeps the money separate from your money. Suppose you drop your bucket off the ladder and it hits someone on the head. They can sue you for all you are worth. You could lose your car, and even your home to pay them. If it's a limited company and they sue the company, the worst that can happen is that the company runs out of money and goes bankrupt. You still own your car and house. So there is a measure of protection with a limited company.

Secret2ndAccount

You should open a SIPP and make your pension payments into that. Maybe People's Pension account is already a SIPP. So Option A is to stay with People's Pension and ask them to transfer in the other two. Option B is to open up a Hargeaves Lansdown SIPP, and make your payments into that. Ask them to transfer in the other 3. You can read more on here to see other companies you might use to host the SIPP.
Whatever you pay in will get a tax top-up. If you put in £400, the amount that ends up in your pension pot will be £500 - the SIPP provider claims it for you. It doesn't matter how much tax you have actually paid. (This only works up to the amount of profit you've made, but it doesn't seem like you're planning to pay in more than 20k!)   You can add to the SIPP monthly, yearly, or whenver you have a bit of spare money.

SVaz

If the £30k is turnover rather than profit,  then £320 a month (£400 gross) contributions is a bit optimistic.
Expenses may be fairly low for a window cleaner but there is still Van insurance/ public liability insurance,  materials, fuel,  Vehicle tax etc. 
Even if you reckon a low £2k in expenses then £28k minus tax/NI gives around £24k.  Almost £4k in contributions is a big chunk out of that. 

£20k to live on is very low. 

First year of trading profits also means putting aside double the amount of tax/NI because of payments on account.
I had to put away an extra £4k for my first year in profit due to this.