Business Pensions for the Self Employed
Pensions are considered to be the most complex of the various personal finance subjects.
Add in the self-employed factor and things get even more difficult.
Our sister website Pension Sorter covers the whole subject of pensions in user-friendly detail.
However, we tell you, below, about some of the types of pension arrangement that may be suitable for you as a self-employed person.
Please note that, if you wanted to pursue getting a pension as a self-employed person, we would strongly suggest you seek the guidance of an Independent Financial Adviser who specialises in pensions for the self-employed. They will ensure you take maximum advantage of what's available to you.
The best way to one is through word of mouth recommendations. (Read more now about How to find one)
The following types of private pension are particularly suitable for the self employed.
Small self administered pension schemes. (SSASs)
Group personal pensions
Self Invested Personal Pensions (SIPPs)
Executive Pension Schemes
Funded Unapproved Retirement Benefit Schemes
Find an IFA
Small Self Administered Pension Schemes. (SSASs).
Occupational Pension plans were really designed with large firms in mind so they are not totally suitable for small businesses.
SSASs enable small businesses to save in a more flexible way and are seen as a type of small company occupational scheme.
A particular attraction of SSASs is that the pension fund can be used to help the business e.g. by providing loans and / or buying commercial property - which the company could then lease back. (All such arrangements have to be done on strictly commercial terms and are subject to detailed scrutiny by the Inland Revenue).
There is also great flexibility with when and how contributions can be made e.g. allowing for up to 70% of a director's salary to be contributed into the pension fund by the company in any one year. This means that in the years when the company cannot afford to make very large pension contributions they can be made up for in better years.
Each member is normally a trustee of the pension scheme. These schemes can be run "out of house" if the company does not want to administer them.
Group Personal Pensions
Some employers offer these as an alternative to their own company / occupational pension plan.
Group Personal Pensions are subject to the rules governing personal pensions i.e. you can save more of your earnings than you can in a company / occupational pension.
They would have an advantage over a personal pensions plan for an employee if the employer makes contributions and if they have negotiated special terms with the pension provider eg reduced charges and more flexibility.
Self Invested Personal Pensions (SIPPs).
With a SIPP you can decide where to invest your pension fund yourself - as opposed to leaving it to the pension fund managers. (Whether or not you award yourself a seven figure salary and a pink porsche for doing so is optional).
With a bit of creative thinking you can invest your pension in your own buisness in a similar manner as with a Small Self Administered Pension Scheme.
Funded Unapproved Retirement Benefit Schemes - (FURBs)
These are for the higher earners. They may sound like friendly little furbies (remember them?) But they're not. They're nasty, spiky and complicated - unless you're an IFA who specialises in them. And that's who we suggest you ask about them.
How to find an IFA
The best way to find an Independent Financial Adviser is through word of mouth recommendations.
However you must make sure that the IFA specialises in your specific area of interest ie the self employed.
Many IFAs will say they know all there is to know about the needs of the self-employed. But this is a highly specialised area. So ask them who they've dealt with recently. Consider how willing they are to offer you a reference who you can talk to directly.
As with so many things follow the old nose. Ask around for recommendations particularly among your business contacts ie which should be more relevant to you than contacts offered via friends and family.
Be wary of exactly where the recommendation came from originally. Your cousin's brother in law may be a very talented accountant or divorce lawyer, or whatever, but isn't necessarily the specialist IFA you need.
To read in detail about IFAs and how to choose one you can go to that section in our sister site Pension Sorter.
However if you don't have an immediate word of mouth recommendation we've been approached by a reputable firm of IFAs who certainly seem to be reasonable people.
Clearly they're interested in getting your business, but they'll speak to you and give a quote on an initial free, no obligation basis. If you're interested in this go to the brief application form and they'll contact you.
If you're approaching retirement and want a customised annuity quote click here.