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While the coronavirus pandemic has affected the health of hundreds of thousands of people worldwide, it has also had a devastating effect on small and medium-sized businesses in the UK and beyond.

The Chancellor has previously announced a substantial package of support for businesses, including paying 80% of the wages of furloughed workers, VAT deferrals and business interruption loans.

Following calls to help freelancers and the self-employed, the government has now unveiled a package of measures designed to support those who own their own business. Here’s a summary of the assistance that Rishi Sunak has announced.

Self-employed tax deferral

Income Tax payments due in July 2020 under the Self-Assessment system may be deferred until January 2021.

You are eligible if your self-assessment ‘payment on account’ is due to be paid on 31 July. It’s an automatic offer and so you don’t have to apply for a deferral. You won’t pay any penalties or interest for late payment if you decide to defer your payment until 31 January 2021.

Note that the deferment is optional. If you are still able to pay your second payment on account on 31 July 2020 you should do so.

Self-Employed Income Support Scheme

After announcing a support package for employed people, the Chancellor was keen to assure self-employed workers that they had not been ‘forgotten’.

The Self-Employment Income Support Scheme will pay a taxable grant to self-employed people equivalent to 80% of their average monthly profits over the last three years, up to £2,500 a month.

Rishi Sunak confirmed that the scheme would be open for at least three months, with the possibility that it will be extended.

The grant will apply to any self-employed workers across the UK who:

  • Have trading profits of up to £50,000
  • Make the majority of their income from self-employment
  • Filed a tax return in 2019 and are already self-employed. To help more people access the scheme, the government confirmed that HMRC has extended the tax return deadline for another four weeks to enable self-employed workers to submit a tax return.

The three months’ income will be paid as one lump sum in June.

The Chancellor said that 95% of people who are ‘majority’ self-employed will benefit and that the 5% the scheme doesn’t cover have an average income of £200,000. These are the steps, he said, to “make this scheme deliverable and fair.”

The scheme essentially covers the same amount of income as for furloughed employees, although has been more difficult to implement because the self-employed are a ‘diverse population’.

If you have less than three years trading accounts, then HMRC will look at ‘what you have’. If you are ‘very recently self-employed’ you will not be eligible for the scheme.

The government hopes that the scheme will be available at the start of June. Workers will have to complete an online form in order to access the grant, which will be paid straight into your bank account.

The Chancellor also confirmed that self-employed workers can also access business interruption loans, for which there have already been 30,000 enquiries.

Universal Credit

Self-employed workers who have seen a significant reduction in earnings are able to claim Universal Credit, providing you meet the usual eligibility criteria.

To support you with the economic impact of the pandemic and allow you to follow government guidance on self-isolation and social distancing, the requirements of the Minimum Income Floor will be temporarily relaxed.

Mortgage payment holidays

The government has announced that mortgage payment holidays of up to three months are available to all homeowners who are up to date on their mortgage payments.

They’re also available to Buy to Let landlords whose tenants have been financially affected by the coronavirus. Landlords who take payment holidays are expected to pass on this relief to their tenants.

Payment holidays are available to any homeowners who are concerned about their ability to meet their mortgage repayments, for example due to a loss of work or other changes in their circumstances.

Note that you will still owe the bank the same amount as you do now, but interest will continue to accrue on this. This means it will take you longer and cost you a little more to clear your mortgage.

Your lender will not require you to provide any documentation or undergo any affordability tests.

HMRC Time to Pay service

If you’re self-employed, struggling with your finances, and have outstanding tax liabilities, you may be eligible to receive tax support through HMRC’s Time to Pay service.

These arrangements are agreed on a case-by-case basis and are tailored to your individual circumstances and liabilities.

If you have missed a tax payment or you might miss your next payment due to Covid-19, please call HMRC’s dedicated helpline on 0800 0159 559.

Changes to Income Tax and National Insurance could follow

In this speech, the Chancellor was at pains to point out that the support for self-employed individuals was comparable to employed workers. Taking this into account, Rishi Sunak hinted that self-employed people may, therefore, pay more tax in future.

The Chancellor said: “If we all want to benefit equally from state support, we must all pay in equally in future. It is just an observation that there is currently an inconsistency in the tax treatment of the employed and self-employed”.

Watch this space!

In recent weeks, the coronavirus has never been far from the headlines. At the start of March, there were more than 87,000 confirmed cases of Covid-19 with almost 3,000 deaths. While the vast majority of the cases and fatalities have been in mainland China, the virus has now spread to more than 60 countries.

One of the most immediate consequences of the coronavirus outbreak has been the impact on global stock markets.

Last week saw a fall of 11% in the value of shares in London, and a fall of 8% in New York. Other markets around the world have also seen sharp falls. While you may be concerned about the short-term volatility of the markets, it’s important to remain calm and focused on your goals.

Why are the markets reacting in this way?

– The closure of Chinese factories has led to concerns about production in the rest of the world. Apple has already warned over the impact of shutdowns in China, while carmaker Jaguar Land Rover has been flying parts out of the country in suitcases. Shortages of components will almost certainly have a knock-on impact in the West.

– A reduction in travel. A travel ban means Chinese tourists are staying at home, while many major carriers have warned of a severe reduction in demand. EasyJet and the owner of British Airways have announced emergency measures, including cancelling flights, changing the size of planes used on routes and freezing pay.

– A reduction in global demand. Dozens of companies, from mining firm Rio Tinto to software giant Microsoft have reported that they will not hit sales targets in 2020.

Lessons from previous epidemics

Earlier this year, Charles Schwab research looked at the impact of previous epidemics on world markets.

Considering outbreaks including SARS, H1N1 Swine Flu and Ebola, the conclusion was simple:

“The global economy and markets have been relatively immune to the effects of past viral epidemics — even when the global economy was especially vulnerable to a shock. A short-term dip in stocks tended to be followed by the continuation of the upward trend… investors may have little need to take action if their portfolios are diversified and aligned with their long-term plan.”

Keep calm and carry on

Whenever you invest in equities, short-term volatility is something that you have to expect. Everything from inflation figures to Donald Trump’s social media updates can affect what happens to markets, and so on any given day or week, there is a chance that prices will fluctuate in the short term.

However, over time, stock markets tend to provide growth. The chart below shows the value of the FTSE100 over the last five years. You’ll see that the closing level at the end of February is still significantly higher than the value of the index just four years ago.

Source: London Stock Exchange

It is always worth remembering that saving is a long-term objective.

As Mark Fawcett, the Chief Investment Officer of auto-enrolment pension provider Nest says: “Pension saving is a long game – people can be saving for up to 40 or even 50 years, so it’s important to keep looking at the bigger picture, rather than short-term events.

“Younger savers should comfortably ride out short-term fluctuations and at Nest we take steps to protect members’ pots as they get closer to retirement and are more likely to need their money sooner.”

  • Your goals are likely to be the same as they were a week or a month ago. Our investment strategies are designed with the long term in mind, and this naturally considers periods of both positive and negative returns.
  • You have a diversified portfolio. The fall in the value of the FTSE 100 is not the same as the fall in the value of your portfolio. Our clients have diverse portfolios that include exposure to other asset classes, for precisely this type of situation.
  • Now is the worst time to panic. While our emotions might take over at this time, reacting to a fall in the markets can be a disaster. You potentially turn a paper loss into a real loss, and a range of studies have found that this is one of the main reasons why investors lose money.

Short-term stock market volatility is normal. While it may feel difficult now – we certainly feel this too – it is part of a long-term investing strategy.

The final word goes to Charles Schwab who, earlier this year, undertook research into previous disease pandemics and their impact on the global economy. Their conclusion was:

“The global economy and markets have been relatively immune to the effects of past viral epidemics – even when the global economy was especially vulnerable to a shock. A short-term dip in stocks tended to be followed by the continuation of the upward trend.”

If you have any queries about the impact of Covid-19 on investments and pensions, please get in touch.

Last month saw the launch of the latest new polymer banknote in the UK. The new £20 note was released in late February and becomes the third new banknote to enter circulation in the last four years.

Considering that the £20 note is the most common note in this country, the introduction of a new banknote is a big deal. So, here are five important facts you should know about the new £20 in your pocket.

1. Who is on it

Following in the footsteps of William Shakespeare, Michael Faraday and Edward Elgar, the £20 note featuring economist Adam Smith was the most recent paper note introduced, back in 2007.

Now, the new polymer note will feature the acclaimed English artist JMW Turner, alongside a blue and gold design which depicts the Margate lighthouse and Turner Contemporary gallery, also located in Margate, where the artist grew up. 

Mark Carney, governor of the Bank of England, said: “Turner’s contribution to art extends well beyond his favourite stretch of shoreline.

“Turner’s painting was transformative, his influence spanned lifetimes, and his legacy endures today. The new £20 note celebrates Turner, his art and his legacy in all their radiant, colourful, evocative glory.”

2. Bring the note to life with Snapchat

The brand-new polymer £20 notes feature a self-portrait of Turner and one of his most celebrated paintings, The Fighting Temeraire.

However, in a first for a British banknote, these images can also be brought to life using augmented reality.

If you have a new £20 note and the Snapchat app, you can hover the camera in your smartphone over a Snapcode (like a QR code) on the banknote. By using Snapchat’s search function to find the £20 note lens, the paintings on the note will come to life.

The feature works by overlaying interactive images onto the banknote, in a similar way to how facial filters can be placed over a user’s face when using lenses in the Snapchat app.

“The launch of the new £20 will result in Turner’s paintings being amongst the most widely distributed artworks in the UK, maybe even the world,” said Ed Couchman, Snapchat’s UK general manager.

“We want to make sure that Snapchatters are encouraged to take note, look at the cash in their wallet and appreciate these great paintings. Hopefully, this partnership will help introduce a whole new generation to one of Britain’s greatest ever painters.”

3. Security features

As you would expect, the new £20 note has a range of security features which will help you to determine that your note is genuine:

  • The hologram – If you tilt the front of the note, the word on the hologram will change from ‘Twenty’ to ‘Pounds’
  • The window – If you look at the metallic image over the main window, the foil should be blue and gold on the front of the note and silver on the back. There is also a smaller window in the bottom corner of the note
  • The Queen’s portrait – You should see a portrait of the Queen on the window with ‘£20 Bank of England’ printed twice around the edge
  • Silver foil patch – A silver foil patch above the see-through window on the front of the note contains a 3D image of a crown
  • Purple foil patch – On the back of the note, directly behind the raised silver crown on the front of the note, you will find a round, purple foil patch containing the letter ‘T’
  • Raised print – On the front of the note, you can feel raised print on the words ‘Bank of England’ and in the bottom right corner, over the smaller window.
  • Ultraviolet number – Under a good-quality ultraviolet light, the number ’20’ appears in bright red and green on the front of the note, against a duller background.

4. Serial numbers that could make the note worth more than face value

In the past, new £5 and £10 notes have sold for big sums if the serial number is of particular interest.

As the first new £20 notes enter circulation, it can pay to take a close look at the serial number on your note as it could be worth more than its £20 face value.

Every banknote is printed with a unique number. When the new £5 and £10 notes were released, the earliest ones to be printed had serial codes that began with AA01 followed by an eight-digit number, starting at 00000001.

These notes can be worth more than their face value. This may especially be true in this case if the serial codes also contain something of interest to collectors – perhaps JMW Turner’s year of birth (001775) or year of death (001851). 

5. What to do with old £20 notes

There is sometimes confusion when a new banknote is introduced, with many believing that the ‘old’ notes are immediately out of date.

However, the Bank of England is at pains to point out that the paper £20 notes remain legal tender.

You will still be able to use the paper £20 note until the Bank withdraws it from circulation. The Bank of England has confirmed that they will give six months’ notice of the withdrawal date of the existing £20 note.

Many banks will accept withdrawn notes as deposits from customers, while the Post Office may also accept withdrawn notes as a deposit into any bank account you can access at the Post Office. You can also exchange withdrawn notes with the Bank of England.

When you picture your retirement, what do you imagine? For some, it may be relaxing on holiday or spending more time with loved ones. But more retirees are choosing this time to launch a business.

Whilst retirement may have once been exclusively been associated with putting your feet up and unwinding. Today, it’s a milestone that’s far more flexible. It’s not surprising that more retirees are tuning into their entrepreneurial spirit to release dreams that may have been long-held.

According to the Office for National Statistics, the number of self-employed people over the age of 65 has more than doubled in the past 15 years. Almost half a million people that would have traditionally retired are continuing to earn an income this way.

There are plenty of reasons why these retirees are still working in some form, from boosting pension income through to enjoying what they do. If it’s something that appeals to you, there’s more than one reason to launch a business in retirement.

1. You’re more financially stable now

You may have hoped to start a business for many years, and for some retirement can be the perfect opportunity to explore those ideas that you’ve had.

Hopefully, you head into retirement financially secure and confident in your income. You’re also likely to have fewer financial commitments, such as paying a mortgage or raising a family. Without these financial concerns, launching a business in retirement can make financial sense. It may mean you’re free to invest in your venture without having to worry about the knock-on effects in years to come.

2. Transition into retirement

More retirees today are choosing to transition into retirement rather than the traditional ‘cliff-edge’ approach. There are many ways to do this, such as working part-time or flexibly. But if starting a business appeals to you, it can be the perfect way to strike the right balance between working and enjoying more free time.

As your own boss, you’ll be in a position to dictate your own hours and the type of work you do. It can be a great way to build an early retirement lifestyle that suits you. 

3. Create a sense of purpose

Whilst the financial side of retirement is often an aspect we focus on, including saving into a pension, the emotional side is just as important. For some approaching the milestone, it can be difficult. Our work is often used to define us and provide a sense of purpose. Without a traditional job, you can lose this.

Starting a business isn’t for everyone. But those that have the entrepreneurial spirit can find that it provides goals and aspirations that deliver a sense of purpose in life.

4. Boost your income

If your current retirement provisions don’t provide you with the lifestyle you want, a business can help increase your income. It can also provide flexibility if your current retirement provisions aren’t flexible, such as the income secured through an Annuity or Defined Benefit pension.

Of course, if you hope to launch a business, there are outgoings to consider too. How will your tax liability change? Will you need to invest in your business? Understanding the income your business will deliver and how this may affect your finances can provide confidence. This is an area financial planning can help with.

5. Turn hobbies into a business

Technology has opened up a whole new customer base for people launching a business. It gives you an opportunity to make money from your hobbies. If you already indulge a passion that you could sell, why not see if there is an audience out there? This is a great option for those that craft things that can be sold either directly or online.

Keep in mind, though, that whilst you may love a hobby turning it into a business will come with other work, from admin to sales. If this isn’t an aspect you’re interested in, it may be worthwhile enlisting some help.

6. Improve your wellbeing

Research has shown that keeping your mind and body active can improve your overall wellbeing in retirement. There are, of course, plenty of ways you can do this but it’s one benefit of launching a business in retirement, it’ll help give your brain a workout, whether you’re getting creative or focusing on the numbers.

Whilst income may not be the sole reasons for pursuing business ambitions in retirement, financial planning is important. It could affect the amount of tax you pay when accessing your pension, for example. Or you may need to understand whether you can sustainably afford to invest in a business. These are concerns that financial planning can help you get to grips with. Please contact us if stepping into entrepreneurship in retirement. We can help provide you with the information and confidence you need.

Do you want your investments to grow or deliver an income? Defining the goal of your investment portfolio can help you build a strategy that’s right for you.

For many investors, their investment goals start with focusing on growth with a long-term view of aspirations that are some years away. You may have started investing with your retirement in mind several decades away. Eventually, you may decide you want to start receiving an income. So, how should you invest if you’re at a stage in your life where you want investments to deliver income?

When you’re investing for growth, you want to back companies that are expanding. Depending on your risk profile, this may have included firms that are in the early-stage companies to maximise the initial amount you’ve put in. This means short-term investment volatility is to be expected. Investment values can fall, but with a long-term outlook, these dips should smooth out to deliver growth.

When investing for income, those that payout relatively high dividends are sought after. This will often be companies that are more mature and don’t invest as much of their profits into the business, providing investors with dividends. As a result, these firms typically don’t grow as much and can be seen as less risky. However, all investments involve risk and it’s important to consider this when investing for income as much as when investing for growth.

Investing for income

After years of investing for growth, to grow your pension or investment fund as much as possible, it can be difficult to know what to do.

As a dip in income delivered could affect your lifestyle, it’s important to look at the track record of both delivering income and preserving capital. This includes looking at how investments have performed during a downturn. As you’re accessing income now, rather than in the long term, volatility could impact your immediate and long-term goals. However, it’s impossible to predict how investments will perform in the future, past performance is not a reliable indicator. As a result, you also need to consider what other income streams you have.

You also need to consider when dividends will be paid. Will it be enough for your desired lifestyle and does it fit in with plans? Most dividends payout twice a year, if you’ll be relying on them to make up the bulk of your income, it can make budgeting more difficult. There are solutions to this, such as choosing investments that payout at different points in the year, or find that an alternative solution is better suited to you.

If you decide to go ahead with switching investments to an income focus, you have two options: build your own portfolio, selecting which stocks you want to invest in, or use an income fund.

They both have pros and cons that are important to weigh up in relation to your circumstances. But whichever you decide, diversification remains important, both geographically and in terms of sectors. It’s a step that can offer some protection against sharp market movements and preserve your income.

You don’t have to choose between investment or growth either. You can build a balanced portfolio that contains both elements if it’s in line with your wider plans.

When should you switch to an income strategy?

Traditionally, investors would have moved to an income-based strategy as they reached retirement. It’s an option that can provide additional income that supports your retirement lifestyle.

However, you may not need an income boost. If a Defined Benefit pension, an Annuity or other sources of income are providing what you need for retirement, you may decide that a growth strategy is still right for you. Retirements have also gotten longer as life expectancy has improved. It’s not unusual for today’s retirees to spend 30 or 40 years enjoying retirement. As a result, you still have time to invest for growth and switch to an income later in life when you need it.

There’s no right time to switch your investment to an income strategy. In fact, it may never fit with your wider financial plans.

What is important, is that you consider your investment goals and aspirations. Your investments should help you achieve your aims, whether this is to retire early or leave a nest egg for loved ones. Please contact us to discuss how your investment can help you move towards goals now and in the future.

Please note: The value of your investment 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.

If you have a Final Salary pension, retirement planning can seem more straightforward. However, there are still important decisions that need to be made and it’s crucial that you understand the income it will provide. Whether retirement is just around the corner or some years away, reviewing your pension arrangements can provide confidence.

First, what is a Final Salary pension?

Final Salary pensions, also known as Defined Benefit pensions, are often referred to as ‘gold plated’. This is because your income in retirement is defined, protected and the benefits are typically competitive when compared to the alternative.

With the alternative pension scheme, a Defined Contribution pension, employees and employers make contributions, which benefit from tax relief and is invested. At retirement, pension savers have a lump sum of pension saving that will be dictated by how much they’ve contributed and investment performance. At retirement, they will have to decide how to access the pension and ensure it lasts for the rest of their lives.

In contrast, with a Final Salary pension, the pension scheme takes responsibility for how investments perform, which don’t have an impact on your retirement income. Instead, future pension income is defined from the outset. This is usually linked to how many years you’ve been a member of the scheme and either your final or average salary. At retirement, a Final Salary pension will pay out a regular income for the rest of your life.

Among the benefits of a Final Salary pension are:

  • You don’t take responsibility for investments: You don’t need to decide where to place your pension contributions, this is in the hands of the pension scheme trustees. The performance of investments won’t affect your retirement income.
  • It provides an income for life: Life expectancy can make planning for retirement challenging, as you don’t know how long pension savings need to last for. With a Final Salary pension, your income is guaranteed for life, taking away this element of uncertainty.
  • The income is usually linked to inflation: In addition to a lifelong income, Final Salary pensions are usually linked to inflation. This means your income will rise in line with the cost of living, preserving your spending power in real terms.
  • Many Final Salary pensions come with additional benefits: Your Final Salary pension may offer auxiliary benefits that provide peace of mind, such as a pension for your spouse, civil partner or children if something were to happen to you.

As a result, Final Salary pensions can be incredibly valuable for providing certainty and security in retirement.

Calculating your retirement income

The good news is that understanding the income you can expect to receive when you retire is usually straightforward.

How the income delivered from a Final Salary pension is calculated varies between scheme. But this will already be defined. If you can’t find the paperwork detailing this, contact your pension scheme. There will typically be three factors used to define your Final Salary income:

  • How long you’ve been a member of the scheme
  • Your final salary or a career average
  • The accrual rate, this is the fraction of your salary that’s multiplied by the years you’ve been a member of the scheme.

Let’s say you earned £60,000 at retirement and it was your final salary that was taken into consideration. You worked at the company for 40 years and the accrual rate was 1/60. Your income in retirement would be £40,000 annually using the below formula.

Years as a member (40) x accrual rate (1/60) x salary (£60,000)

You should receive an annual statement from your pension scheme, which will include providing a value of your pension at retirement.

Creating flexibility with a Final Salary pension

A Final Salary pension can provide you with security throughout retirement. Yet, you may still want a flexible income to meet your retirement goals. This may be because you plan to spend more in early retirement or at other points. For example, you may have mortgage debt remaining, plan to travel or want to financially support loved ones.

There are ways that you can achieve the best of both worlds.

Many Final Salary pension schemes will allow you to take a one-off lump sum from your pension to kick-start retirement. This will reduce your income during retirement but does provide the capital for flexibility if needed.

Other options include using a Defined Contribution pension to fund a one-off expense if you have one and using your other assets, such as investments, to create a flexible income. It can be difficult to understand how your different assets fit together to help you reach retirement goals. This is an area we can help you with.

Transferring out of a Final Salary pension

If you have a Final Salary pension, you may be considering transferring out.

At retirement, you do have the option to give up the benefits of a Final Salary pension and receive a lump sum instead, which must be transferred to a Defined Contribution pension. There may be some benefits to doing this, such as providing greater income flexibility, but for most people transferring out isn’t the most appropriate option for them.

Receiving a lump sum can seem attractive. However, what you’re giving up, a guaranteed income for life is often more valuable. It’s important to weigh up your financial security and retirement goals before making a decision. If your Final Salary pension is worth more than £30,000, you must take regulated financial advice first.

Please contact us to discuss your Final Salary pension and what it means for your retirement lifestyle. Usually, there are ways to create a flexible income stream that will suit your goals whilst retaining the security one offers.

Please note: Transferring out of a Defined Benefit pension is not in the interest of the majority of people.

Being self-employed comes with many perks, but it will mean you need to take more responsibility for your income and financial security too. From managing incoming work through to submitting tax returns, there are extra tasks you’ll be faced with. One of them is organising your pension.

Most people traditionally employed will now benefit from auto-enrolment. As a result, the number of people saving for retirement has seen a huge surge, but this has yet to be extended to the self-employed. Figures from the National Employment Savings Trust (NEST) estimate that just 24% of self-employed workers are actively saving into a pension and 55% want more guidance on how best to save for retirement.

With over 15% of the UK workforce now self-employed, the lack of pension savings could mean millions face financial insecurity in their later years. The good news is that it’s never too late to start saving for retirement and there are steps you can take to boost your pension.

Why use a pension to save for retirement?

The money contributed to a pension is locked away until you reach retirement age. Currently, pensions become accessible at 55 but this is expected to rise alongside the State Pension age in the coming years.

When you’re self-employed, your income may fluctuate and there may be periods where you’re not earning an income. It can mean that locking money away for potentially decades can be a daunting prospect. Yet, a pension remains the most efficient way to save for most people.

There are three key reasons for this:

  1. Whilst you won’t receive employer contributions topping up your pension, you will still receive tax relief. Assuming you stay within the limits of the Annual Allowance, you’ll receive tax relief at the highest rate you pay Income Tax. It’s an advantage that can help your pension grow at a faster pace.
  2. Pensions are usually invested and over the long term, this helps your savings grow. Over the decades you may be saving for retirement, investing can help your savings outpace inflation to deliver returns. As you can’t access these returns, you’ll also benefit from the compounding effect.
  3. Returns generated through investments held in a pension aren’t taxed either. Instead, your income is taxed when you start making withdrawals.

7 tips for building your retirement pot

1. Set up regular contributions

Regular payments throughout your working life add up. Getting into the habit of making consistent contributions to a pension can lead to security in later years.

This is something that many self-employed workers recognise. Some 56% said they favoured the idea of automatically diverting a portion of their income to saving for retirement. Whilst this is a key part of auto-enrolment for employed workers, you’ll need to take a more proactive approach. It can be as simple as setting up a standing order for the end of each month, so you don’t even have to think about it. 

Keep in mind, though, you won’t be able to make withdrawals from your pension before you reach retirement age. Ensure you’re putting away an affordable amount.

2. Contribute more when you can

Affordability is a crucial part of building up your retirement income. If your income fluctuates throughout the year, set up regular contributions based on what you know you can afford.

However, don’t leave contributions there. In the months where you receive a higher income, divert a greater portion to your pension for a retirement boost. Alternatively, you may want to contribute a lump sum at tax year end. Making a one-off payment to your pension is usually simple and can be done online in most cases.

3. Understand pension investments

How is your pension invested?

There are numerous options for self-employed workers, from using NEST, a workplace pension scheme set up by the government which allows you to choose a fund, to a Self-Invested Personal Pension (SIPP) if you’re confident choosing your own investments. What’s right for you will depend on your circumstances and investment knowledge.

Whatever options you choose, understanding your investments is important. All investments involve some level of risk and you need to ensure it aligns with your risk profile. This will depend on a range of factors, including how far away retirement is, the other assets you hold and overall attitude to risk. Understanding the risk and expected returns of your investments support retirement planning.

4. Keep track of your pension

Regular retirement contributions are important for building your pension up. However, your involvement shouldn’t stop there. Keeping track of how your pension is growing is just as important.

Areas to keep an eye on include investment performance and fees. Here, it’s crucial that you look at the bigger picture. At times, investment volatility will mean investment values fall. But when you take a long-term view you should see your pension gradually rising to reach your goals, thanks to contributions, tax relief and investment performance.

5. Recognise other assets can be used in retirement too

Pensions are an efficient way to save for retirement but it’s not the only asset that can be used to create an income or capital once you give up work. Where flexibility is needed, these other assets can provide peace of mind. They could include investments held in ISAs (Individual Savings Accounts), property or an emergency cash fund.

Take some time to understand how these might provide for you in retirement and whether you’re getting the most out of your capital. It’s a step that can provide confidence as you plan for retirement.

6. Check your National Insurance contributions

The State Pension might not be enough to retire on alone but for many, it’s an important foundation for creating a financially stable retirement income.

To qualify for the full State Pension, which will be £9,110.49 annually in 2020/21, you’ll need 35 years on your National Insurance record. It’s worth looking at how many qualifying years you already have and consider how long you expect to continue working. It is often possible to fill in the gaps if necessary, to boost the amount you’ll receive when you’re retired.

7. Speak to a financial adviser

Pulling together the different aspects of retirement planning can be difficult. How much do you need to retire comfortably? Should you increase your pension contributions? What income can you expect in retirement?

Working with a financial planner whilst still working can help make sure you’re on track to meet retirement goals. It’s a step that can address where gaps are and what you need to do to bridge them. Please contact us if you’re self-employed and have questions or concerns about your retirement. Whether you’re already paying into a pension or have yet to open one, we can help create a plan that allows you to achieve the retirement you’re looking forward to.

Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.