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Pensions are important if you’re freelance - here’s what you need to know

Is sorting out a pension on your list of priorities? Let's face it, it's something which we know we should do, but it always slips to the bottom of the to-do list.

When I left full time employment, I assumed that it was the end of my private pension and I didn't realise until recently that you can have a flexible pension as a business owner. I wanted to share this discovery with you!

Pete Hykin, pictured, is the co-founder of Penfold - a brand new pension scheme for the self-employed.

Here he answers your Freelancer FAQS about pensions. 

[This is a sponsored guest post which includes valuable information about pension options for the self employed]


Being a freelancer means taking a leap of faith. Whilst it’s true that working for yourself outside of company infrastructure allows you to escape the confines of office life, it also requires the shedding of a safety net. However, this is a choice that more and more people are making throughout the UK as the world wakes up to the fact that modern workings life can, and should, reflect the freedom and flexibility that modern life requires.

Now when using the terms freedom and flexibility, pensions might be the last topic that springs to mind but brand-new company, Penfold, aims to change that by being the first and only pension scheme built specifically with the self-employed in mind.

Here, co-founder Pete Hykin answers all your freelancer FAQs on pensions, why they’re important and how they can suit you - both in terms of freedom and flexibility.

Why do I need a pension?

A very reasonable question on the face of it - why should I pay money that I need now into something I can’t access for 30+ years? Can’t it wait till later? I can answer that question with another one - could you live on £8,767 a year? That’s the current yearly rate of the UK state pension, assuming national insurance contribution. That simply isn’t enough for people to live their retirement the way they wish, assuming they will retire at all. The best way, tax wise, is to set aside a small amount of money each month into a pension whilst you work - this then turns into annual income once you retire.

The reasons pensions are so good are two-fold. For one, any amount of money you save into a pension, the government adds in another 25% - for free. So, £100 becomes £125, and £1,000 becomes £1,250 without you lifting a finger. Secondly, pensions benefit from what we call Einstein Money. Imagine you invite two friends to a party, who each invite two more friends and so on - with this compounding, the party has soon grown to 300 people. Your money behaves the same way in a pension and the earlier you save, the more Einstein Money you can get! Check out the Einstein calculator on Penfold’s website to see how much you could earn.

The earlier you save, the more Einstein money you earn. Einstein Money is not guaranteed, but is a reasonable estimate of the effect of compound investment returns on the amount you put aside in a pension over a long period of time, using a widely used growth assumption.

Aren’t pensions really confusing?

Currently, they are and that’s one of the reasons why so many people avoid creating one. You quickly become bogged down in jargon, wade through percentages and find hidden fee upon hidden fee. After hours on hold, many put down the phone and never pick up the thought again.

We’re aiming to be just the opposite. With Penfold, everything can be done online, it takes only 10 minutes to set up (genuinely!) and you can choose a pension that suits you - whoever you are. There is absolutely no technical language. The online dashboard shows you all the details about your pension as well as information on how to change it.

The Penfold dashboard shows all your information in once place. You can change risk level, monthly contribution and even recommend a friend! Picture shown is the upcoming mobile app. The desktop shows the same information.

How much should I pay in?

This is a tricky question and Penfold will work with you to determine a monthly amount that not only achieves your long-term goal but is an amount you feel comfortable with now.

Not only that, to reflect the flexibility of freelancing, Penfold allows you to alter your monthly contribution completely free of charge. We know the world of freelancing is an unpredictable one. Workloads fluctuate through the year - so why should a pension payment stay the same? With Penfold you can increase, decrease or even outright pause contributions to suit you. One-off top ups can also be made should you have a bumper month!

I’ve got several pension pots from previous jobs - what shall I do with them?

Many people forget old pension pots exist or if they do, find they have no idea how to track them down. Upon request, Penfold can find and combine all your existing pension pots completely free of charge - who knows, you may have a handy couple of hundred pounds lying around!

When should I set up a pension?

As soon as you possibly can. The earlier you save, the more Einstein Money you earn and the better your government contributions. Trust me - it’ll be the most useful ten minutes of your life.

 

Penfold is a new pension scheme set up in May 2018 with the intention of kick-starting a revolution in pensions. Championing flexibility, Penfold was built by freelancers, for freelancers. With a completely online set up, it allows users to sign up quickly and keep track of their pension in one place. A mobile app is coming soon. Penfold and all its partners are completely authorised and regulated by the Financial Conduct Authority and are FSCS protected. Full T&C's here.

NOTE: With pensions, as with all investments your capital is at risk. Pensions are a long term investment and the value of what you put in may go up as well as down.

OFFER: The link used in this post is a refer-a-friend link which means we both receive £25 in our accounts when you make your first payment in to your pension. T&C's can be found here.

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