Self-employed pension

AndrewParryMusic · 21 August 2017 at 12:21PM

Hi all. I'm 30, self-employed and pay basic rate tax. I want to start paying into a pension but can't be bothered to sift through the confusing pension options, and I like the look of a lifetime ISA. I am going to try and pay the max £4000 per year until I'm 50.

Two questions - is this a good idea?? And as I'll be paying in for longer, should I go for an investment lifetime ISA or just stick with a cash ISA? Investment ones scare me a bit but I presume it will most probably maximise my return?

Or if someone strongly suggests I go down the private pension route, do let me know, and perhaps suggest where I should start!

Thanks very much!

Andrew

Linton · 21 August 2017 at 12:47PM

Do you operate through a limited company? If so having the company pay the pension can be beneficial.

Saving money for the long term in a cash ISA is a seriously bad idea. You are likely to see the value of your savings steadily depeleted as the interest fails to match inflation. Properly managed investments can be expected to significantly exceed inflation over the long term.

Why are you only looking at a 20 year time frame? £4K/year is very unlikely to provide enough to retire at 50.

PS I suggest you post in the main Pensions forum, not in this sub forum which many people wont read, especially as your post is about pensions generally, not Auto-enrolment

xylophone · 21 August 2017 at 1:45PM

http://www.litrg.org.uk/tax-guides/self-employment/pensions-and-self-employment

https://www.cavendishonline.co.uk/pensions/pension-guidance/contributions-limits/

https://directory.moneyadviceservice.org.uk/en

AndrewParryMusic · 21 August 2017 at 3:14PM

Ah sorry I didn't realise I was posting in auto-enrolment! Whoops.

To answer your questions - no I don't operate through a limited company.

The reason I was looking at the cash ISA was because it was an option for the lifetime ISA where the government pay the 25% bonus per year.

And the reason I said I would pay into it until I am 50 was just because that's when the government stop paying the 25% bonus, although actually thinking about it I would continue to pay into it until I was 60 as that is the only time I would be able to access the money anyway.

Thanks very much for your responses, really useful! Any other advice about where I might best start looking for superior pension options would be much appreciated...thanks!

AndrewParryMusic · 21 August 2017 at 3:22PM

Oh also is there a way of moving this into the pensions thread or should I just make a new one?

xylophone · 21 August 2017 at 5:21PM

superior pension options

You could consult an IFA - see post above.

dunstonh · 21 August 2017 at 7:31PM

but can't be bothered to sift through the confusing pension options, and I like the look of a lifetime ISA.

Yet the lifetime ISA is not that tax efficient for most people and hardly anyone offers it. It can be viable in some scenarios but the pension beats it in most.

Two questions - is this a good idea??

Better than nothing but probably not the best option.

And as I'll be paying in for longer, should I go for an investment lifetime ISA or just stick with a cash ISA?

Cash would be a really bad choice for something you are going to need for the next 40-60 years.

Investment ones scare me a bit but I presume it will most probably maximise my return?

Cash should scare you more. if you paid £4000 into investment backed options, you would need to pay £12,000 into cash to get the same anticipated final pot. Investments may give you shortfall risk and inflation risk but cash WILL give you inflation risk and shortfall risk.

Self-employed pension

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