How a financial planner could help self-employed clients secure their retirement

Auto-enrolment started in 2012 and since then, workers across the UK have been routinely signed up to workplace pension schemes as soon as they meet the threshold for earnings. 

This has had a very positive effect on pension participation, allowing many people to start saving for retirement earlier in their career and build a healthy pot to draw on in later life.

Unfortunately, the self-employed are at risk of being “left behind” as they are not automatically enrolled in a pension scheme. As a result, many may not be saving enough for retirement. 

According to PensionsAge, 76% of self-employed people surveyed in 2023 were not paying into a pension and 38% didn’t have a pension at all.

This could mean that your self-employed clients are unprepared for retirement and might not be able to achieve the lifestyle they hoped for.

Fortunately, working with a financial planner could help them build their savings and secure a comfortable retirement. Read on to learn how.

A financial planner can explain retirement planning and pension options to your self-employed clients

Your self-employed clients may fall into the trap of thinking that their business will provide income to supplement their State Pension in retirement.

Some people plan to keep the business and hand day-to-day operations over to somebody else when they retire. Alternatively, they might decide to sell the business and use the proceeds to fund their lifestyle.

However, there is no guarantee that the business will remain profitable or that they will be able to sell it for a good price.

A financial planner can explain why relying on the business to fund their retirement could be a big risk, and how they might benefit from a robust retirement plan.

We can then discuss the different pension options available to self-employed people including:

  • Personal pensions
  • Stakeholder pensions 
  • Self-invested personal pensions (SIPPs).

We can also explain certain rules such as the Annual Allowance or how pension tax relief works. We’ll make sure your clients understand the tax benefits surrounding pension savings and how they can ensure they’re making the most of tax-efficient contributions.

This knowledge may be very valuable for clients who have no prior experience with pension saving.

Guidance about budgeting and cashflow management could help your clients maintain their pension contributions

Saving in a pension may be relatively straightforward if you are employed as your employer deducts the contributions from your salary before you receive it. You can then budget with whatever is left over.

However, for the self-employed, it may be more challenging because it is up to them to find and set aside funds for their contributions. 

Many business owners reinvest any additional funds in the company and may neglect their retirement savings as a result. Additionally, if revenue falls, it could be difficult to maintain pension contributions.

We can use cashflow planning to help your self-employed clients determine what level of contributions they might need to make to achieve their desired lifestyle in retirement. Then, we can give them guidance on budgeting and cashflow management to help them find the funds to make those contributions.

This may be especially important if they have missed out on pension saving in previous years and need to “catch up”.

We will work with them to find a way to make sustainable pension contributions that allow them to reach their savings goals, while also growing their business.

Tax planning strategies may help your self-employed clients retain more of their savings and extract wealth from their business

Tax planning may help your clients retain more of their wealth, and this could allow them to contribute more to their retirement savings.

For example, we could explain how increasing their pension contributions might reduce their Income Tax bill. Additionally, we can give them guidance about tax wrappers, such as ISAs, to help them save and invest for the future tax-efficiently.

We may also be able to assist with extracting wealth from their company and potentially reducing certain business taxes. 

For instance, they might be able to reduce their salary and take a portion of their income as dividends instead. This could reduce their Income Tax bill as dividends are typically taxed at a lower rate than their salary.

Making employer contributions to their own pension may also be tax-efficient as they are considered allowable business expenses. As a result, your clients may be able to reduce the Corporation Tax and National Insurance (NI) they pay.

When your clients reach retirement and draw from their savings, we can explain ways to potentially mitigate the tax they pay, so they can retain more of their wealth and fund their lifestyle for longer.

Get in touch

If you have self-employed clients who need guidance about retirement planning, we are here to help.

They can contact us at hello@ardentuk.com or call 01904 655 330. As an award-winning financial advice company that was a 2022 VouchedFor Top Rated firm, you can be sure that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate cashflow planning or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.  

Workplace pensions are regulated by The Pension Regulator.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Get in touch

By talking about your current situation and listening to your aims, we create a personalised plan that will put you on a path to achieving your aspirations.

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