Top tips for saving for retirement if you're self-employed

Do you work for yourself? This is your five-step action plan for a happy retirement.

How to save for retirement if you're self-employed

There are lots of advantages to being self-employed. But being your own boss also means you're the only person who can manage your preparations for retirement.

There is nobody to choose a pension scheme for you, ensure you are registered for auto-enrolment or make employer contributions to your fund.

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Never earning the same amount each month can also make saving difficult, which is another reason only about one in 10 self-employed workers in the UK contribute to pension schemes.

Jon Greer, head of retirement policy at Old Mutual Wealth, said: "The auto-enrolment initiative has been successful in helping more people to save for retirement.

"But the UK's five million self-employed aren't covered by auto-enrolment at all, with just 12% saving into a pension today."

Putting money aside for retirement is crucial, however, whatever your job. That's why we have come up with a five-step action plan for the millions of self-employed Britons with no retirement savings in place.

1. Ensure you qualify for the full State Pension

Self-employed workers are entitled to the State Pension in the same way as anyone else.

The level of the payments you receive will depend on your National Insurance (NI) record.

You can up your contributions if you are lagging behind to ensure you don't miss out. To find out more visit the government website.

2. Start saving into a pension fund today

The State Pension alone is unlikely to provide you with enough income to enjoy the retirement you want. For the current tax year, recipients receive just £159.55 per week.

So it makes sense to invest in a personal pension, with which you choose where you want your contributions to be invested from a range of funds offered by the provider.

The earlier you start, the better. It gives you more time to contribute to your savings before retirement, more time to benefit from tax relief, and more time for your savings to grow.

When you do, the provider will claim tax relief at the basic rate of tax on your behalf and add it to your pension savings.

If you're a basic-rate taxpayer, for every £100 you pay into your pension, the government will add an extra £25.

If you are a higher rate taxpayer you can claim back a further £25 for every £100 you pay in through your tax return.

3. Choose the right personal pension for you

There are three types of personal pension available: ordinary personal pensions offered by most large providers, Stakeholder pensions that only have charges of up to 1.5%, and Self-invested personal pensions, which offer more investment options, but often have higher charges.

You may want to choose a Stakeholder pension if your income goes up and down as these schemes allow you to stop and start your contributions without being penalised.

4. Open a Lifetime Isa

You can save up to £4,000 a year in a Lifetime Isa as a lump sum or by putting in cash when you can. The state will then add a 25% bonus on top.

So if you save £1,000, you'll have £1,250 and if you save the full £4,000, you'll have £5,000. And that's before interest or growth.

The bonus is paid every year until you hit age 50. However, Lifetime Isas are only available to the under 40s.

If you are 40 or over, a pension is your only option to benefit from similar tax breaks.

5. Save as much as you can

Saving £4,000 a year into a Lifetime Isa is a good first step on the road to a comfortable retirement - if you're young enough to qualify.

But £4,000 a year is unlikely to be enough even if you are under 40, especially if you are already in your 30s.

So even if you open a Lifetime Isa account, you should still make extra contributions to a pension fund.

You can save as much as you like towards your pension each year, but there's a limit on how much will get tax relief. This is called the annual allowance, and is currently set at £40,000.

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