4 practical ways to help your self-employed clients sort out their pension

business person speaking to financial planner

Your employed clients will likely have the peace of mind that their employer has auto-enrolled them in a pension scheme.

Conversely, your self-employed clients have the financial responsibility of arranging their own pension, which might feel overwhelming.

Research published in FTAdviser shows that the number of self-employed people in the UK is on the rise. There were 4.24 million self-employed Britons in 2023, and over-65s accounted for approximately 12% of this total. And yet, this group of workers are the least likely to save into a pension.

However, starting to save for retirement as early as possible is important for financial security and wellbeing later in life.

Read on to find out how to help your self-employed clients take control of their retirement by sorting out their pension.

1. Track down existing pensions

If your client has moved between roles during their career, whether as an employee or a self-employed individual, there’s a good chance they have one or more pension pots, even if they’re not aware of them.

According to Which? the number of “lost” pensions increased by 73% between 2018 and 2022. And the value of these pensions stood at £26.6 billion in 2023.

So, if your self-employed client is trying to get their pensions in order, tracking down old pensions could be a simple first step.

Most pension providers send an annual statement to their members. If your client can locate this paperwork, they’ll then be able to contact the provider for information about their pension.

However, if they’re unable to find these documents, they can track down old workplace pensions by contacting the employer or provider for details.

Alternatively, they could use the government’s free pension tracing service to obtain the correct contact details for their previous employers and pension providers.

Once your client has found all their pensions, they can review how much they’re worth and either leave them where they are or consider transferring them to a new pot. This brings us to…

Read more: How to track down lost pensions and savings

2. Consider consolidation

Pension consolidation could provide several benefits for your client.

Keeping track of their pension could be much easier

Managing a single pension could be much easier and less time-consuming than keeping track of lots of smaller pots.

They will have a single overview of their savings 

Having a single view of their funds may help your client monitor their pension and work out how much they need to contribute to achieve their retirement goals.

They may pay less in charges

If your client has old pensions, they will almost certainly be incurring charges on the plans they’re no longer paying into. Moreover, older schemes often have higher charges, so your client might benefit from consolidating their funds into a single scheme with lower charges.

However, when considering consolidation, your client should be aware that some providers charge exit fees for transferring a pension and they may lose access to guaranteed benefits.

3. Determine whether their pension will provide the retirement lifestyle they want

Considering how long their retirement might be and what kind of retirement lifestyle they hope to have could help your client work out whether they’re contributing enough to their pension.

Depending on when your client plans to retire and how long they’re likely to live, their retirement could potentially last 30 years or more. And their expenditure is likely to vary over time as their needs and lifestyle preferences change.

So, determining whether their pension will provide the retirement they want may be complex.

A financial planner can use cashflow modelling to build a clear picture of the retirement income your client could expect based on their current savings and contributions. This could help them understand if they’re on track to achieve their retirement goals, or if they need to make some adjustments, such as increasing their contributions.

4. Ensure clients are making the most tax-efficient contributions

If your client runs a limited company, they could make pension contributions through the business.

This is a tax-efficient way for your client to build their pension fund because employer pension contributions can be offset against a company’s profit for Corporation Tax purposes. Also, the business typically won’t pay National Insurance on pension contributions.

If your client is unsure of how to make tax-efficient pension contributions or feels confused about their pension options, speaking to a financial planner could help.

To find out more, please get in touch. Email or call us on 01454 416653.

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.

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