What is a Pension?
Pension is a way through which people prepare for their retirement. People who are employed or self-employed can set aside some part of their earnings and contribute to a retirement scheme. Pension is often associated with government officials or those in formal employment although this is not often the case. To avoid enrolling in a mis-sold pension, one needs to consult financial advisers. They will provide all the necessary information needed to avoid mis-sold pensions in addition to ensuring you get claims advice and the best out of your pension plan.
Factors to consider when choosing a pension scheme as a self-employed individual
If you are self-employed and you are considering enrolling in a pension scheme, you need to be careful not to get a mis-sold pension. Some of the factors necessary to avoiding mis-sold pensions are:
- Determine the type of pension plan that you want to enroll in. There are three different categories of pension plans, and you need to determine which one will be suitable for you.
- Consult a financial adviser. To ensure that you choose a plan that best works for you, ensure that you consult a financial adviser for interpretation. You will also get claims advice on the pension plan you choose and the benefits you are entitled to.
Why do you need a pension even when you are self-employed?
Even when self-employed, you need to consider contributing to your pension. Some of the benefits accrued from a pension scheme are:
- It allows you to save for your future. Although many people who are formally employed are often required to enter a pension scheme where the employer contributes partly to it, self-employed people have to plan for their retirement. With self-employment being uncertain, enrolling in a personal pension scheme allows you to plan for the time when you cannot work.
- It helps you save more for your retirement. You could be having a state pension scheme or a private one from your previous employer only for them to be insufficient for your financial needs. To be safe, you will need a private pension to help increase the number of finances that you will get after retirement.
- Businesses can fail and your pension could shield you at old age. Most people who are self-employed are often owners of small and medium enterprises that are at risk of failure. When the global economy is facing a recession, the economic shocks could cause turbulence in your small business today or in the future. A pension scheme can act as a source of income after retirement and you could even use it to finance your business.
- It gives you peace of mind. There are many issues that people have to deal with at old-age. Chronic and lifestyle diseases are common in aging people, and this is often a source of concern for them. If you are self-employed, a pension scheme is vital in ensuring that you do not have to worry about your financial status. This gives you peace of mind and allows you to enjoy your old age.
- Pension allows you to get the life you want after retirement. The state pension is not often sufficient to give many people the lifestyle they desire after retirement. A private pension, however, can help you contribute towards your life after retirement. By saving from your earnings, you create a pool of funds that will help finance your lifestyle when you can no longer work.
- You will enjoy self-employed pension tax relief. If you are self-employed and paying high taxes, you can enroll in a pension scheme to enjoy the self-employed pension tax relief. This will be beneficial to your business because it helps reduce the amount of taxes that you are required to pay.