If you're self-employed, is your State Pension at risk? - Wren Sterling

Self-employed workers tend to have low levels of pension savings, leading to greater reliance on the State Pension. Due to planned changes to the National Insurance threshold, about 1 million workers in the UK are at risk of losing or receiving a reduced State Pension.

How much is the State Pension?

The ‘New’ Full State Pension is £168.60 per week. To qualify for this, you’ll usually need at least 35 qualifying years on your National Insurance record – you may receive credits towards your State Pension contributions if you are a carer, are unemployed or cannot work due to illness or disability.

Do I qualify for the State Pension?

If you earn less than £165 a week, you won’t need to pay National Insurance (the Primary Threshold) – but you won’t qualify for the benefits of National Insurance (like the State Pension) unless you earn less than £118 a week. This may be subject to change. In the 2019 general election, the Conservatives pledged to raise the earnings threshold, but have not announced whether the lower earnings limit would also be increased.

The dangers of being self-employed

Self-employed workers miss out on workplace contributions provided by their employer, topping up their pension fund. If you’re self-employed, you will also need to make your National Insurance contributions through your self-assessment tax returns in order to qualify for the State Pension.

‘Employed’ workers must choose to opt out of a workplace pension, which encourages them to save for retirement. There is currently no equivalent for the self-employed – so it comes as no surprise that almost two-thirds of self employed workers say they have never saved into a pension. With future changes to pensions on the horizon, the responsibility falls to self-employed individuals to look after their retirement.

How can I boost my pension in retirement?

Even if you’re already retired and drawing on your pension benefits, you can still contribute to your pension fund. You may not be aware of these state benefits; Pension Credit (made up of Guarantee Credit and Savings Credit) and Council Tax Reduction. Just Group found that 42% of those eligible were missing out on these benefits and losing as much as £13,600 a year.

Speaking to an independent financial adviser and your accountant is a good idea as they can identify any potential shortfall in your state pension provision and develop a plan to get you back on track or create alternative retirement income strategies.