If you’re self-employed, is your State Pension at risk?

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 £185.15 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?

You will need to pay mandatory National Insurance if you are an employee and earn more than £242 a week, or if you are self-employed and make a profit of more than £11,908 a year.

Even if you do not pay National Insurance, you will still qualify for certain benefits and the State Pension, if you are an employee earning between £123 and £242 a week, or self-employed and your profits are between £6,725 and £11,908 a year.

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.

Easy-to-understand financial advice

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.

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