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How to set up a Personal Pension as a freelancer
Working as a freelancer has many benefits, but possibly one of the biggest disadvantages is not having access to a works pension. Being employed by a larger company often comes with lots of company benefits, such as a works pension. While this can be very lucrative it isn't always worth the hassle of working within a chain of command. If you work on a freelance basis you are legally self-employed. In the past the self-employed would receive a lesser state pension to those in fulltime employment; however the new state pension plans should overhaul this. You can't just rely on your state pension though, especially if you want to enjoy a financially comfortable retirement. This is why you may also want to consider setting up a personal pension.
What kind of personal pension should I choose?
This is entirely up to the kind of pension that you want.
If you don't want to have to worry about where your money is invested, a pension based on defined contribution arrangements would be best for you. Both personal pension plans (PPP) and stakeholder pension schemes (SHPs) use this format. If you would rather have complete control over where your money goes, a Self-Invested Personal Pension (SIPP) plan would be better.
How can I set up a personal pension?
There are numerous personal pension providers out there, such as Aviva, Standard Life, Liverpool Victoria, Prudential, and many, many more. One of the best ways to find the most lucrative option for you is to use a comparison website.
How do I pay into a personal pension?
Depending on the kind of pension you set up, you will either be tied into depositing a certain amount each month, or you can amend the amount you put in. This will allow you the freedom to lower your payments if you don't make enough contribute one month.
What if I have other outgoings?
Everyone has monthly outgoings, but if yours are getting a bit too much to manage you should work on getting them under control before you consider taking out a personal pension. If you have any debts that you're trying to write off, set up a repayment plan to begin sorting things out. You can use a debt calculator to begin getting your debts under control. Once you have started making regular repayments on your credit cards, store cards, overdraft or any other debts that you may have accrued, you can begin thinking about setting up a pension plan. Contemplating your future can be quite scary, especially if you work freelance and aren't sure what your options are. By working out a retirement plan you can begin getting things to make sense though.
This article was provided by Aurora Johnson on behalf of Nixon Williams, a freelancer accountant.
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