From MoneyWeek · · 1m 10s
Self-employed pay into SIPP for pensions
Self-employed can save tax-efficiently with SIPP pensions despite income instability.
In brief
Self-employed can save tax-efficiently with SIPP pensions despite income instability. Self-employed individuals can contribute to a self-invested personal pension (SIPP) for tax relief and flexible savings without employer contributions. Originally reported by MoneyWeek.
Self-employed pension savings gap
Only 4% of fully self-employed people currently save into a private pension according to Pensions Commission figures.
Self-employed outside auto-enrolment
Self-employed sit outside the auto-enrolment system which requires employers to offer pension schemes and sign up staff unless they opt out.
No employer contributions
Self-employed miss out on pension contributions from employers that members of occupational schemes enjoy.
Income instability challenges
Self-employed often lack spare cash when building businesses and have lumpy unpredictable earnings patterns.
SIPP flexibility
Self-invested personal pensions allow contributions that reflect shifting income streams without fixed monthly payments.
Tax relief benefits
A £1,000 contribution costs basic-rate taxpayers £800, higher-rate £600, and additional-rate £550 through tax relief.
SIPP setup
Self-employed can open a SIPP through online investment platforms to secure tax relief without fixed monthly payments.
Annual allowance rules
Self-employed can use carry-forward rules to make use of unused annual allowances from previous three tax years.
The one thing
Self-employed individuals can contribute to a self-invested personal pension (SIPP) for tax relief and flexible savings without employer contributions.
