Figuring out your pension as a freelancer or blogger

Pensions are difficult to get your head around at the best of times. If you’re employed, chances are you don’t really need to understand pensions too much; since your employer will automatically deduct your contributions. If you’re self-employed, however, it’s a whole different story.

This is a sponsored post with pension provider Penfold, who I have used to set up my pension, but all words are completely my own. The post also contains my referral link for Penfold.

I’ll be honest. Since going self-employed about two years ago, I haven’t yet set up a pension (until now that is!). So my pension contributions at the moment consist solely of a teacher’s pension pot that I have paid into for about five years (and I’ll be honest, I have no idea how much is exactly in it). There are many reasons I put off starting a pension. For one, getting my head around taxes seemed difficult enough. And I guess I felt like I had loads of time to get it sorted. I tried to look into it a few times but just felt overwhelmed by the process and, with freelance income fluctuating so dramatically, I found it impossible to decide how much I should be contributing.

I think there’s something about becoming a parent that makes you think: shit, I really need to get my finances sorted! So my New Year’s resolution this year is to be more financially savvy. I’m going to do my taxes at the end of each month rather than scrambling around in December (please pray I stick to this!) and I’m finally going to sort my pension and get a regular contribution (however small) going again.

Enter Penfold…

If you haven’t noticed, the pension options for us freelance parents out there are limited and tricky to access without a financial advisor. It’s also hard to know where to begin. Setting up contributions for hundreds of pounds a month sounds good in theory but what happens when our tax bill looms or we have a stack of unpaid invoices. There might also be months when we’re more financially steady and want to pay more but aren’t sure how to.

Unlike most pensions, Penfold is designed specifically for self-employed people like you and I. Which means it is really really simple to use (it takes about five minutes to set up and their calculator can help you figure out what to set your contributions for) and the best: it’s FLEXIBLE. You can pause, stop or boost your pension payments all online. In other words, it’s a service that completely understands how us freelancers feel!

How much should freelancers put aside for pension contributions?

The first thing to do when you join Penfold is to use their super easy calculator. Just pop in how much you earn and any current pension pots you have and they’ll do the rest! As you can see, they estimate how much you need to save each month and what you’ll end up with; as well as government contributions (which Penfold automatically claim this and adds it for you). For the screenshot below, I just typed in a few different figures so it’s not reflective of my current status-I just wanted to see how my contributions might change as my earnings might throughout the year.

This estimate will give you an idea of how much to start putting in, but the beauty is that you can change this each month in seconds. You’ll also need to decide the ‘risk’ you’d like to take with your pension. As a pension, like all investments, comes attached with risks, you can select from four levels (which are a different mix of bonds and shares which come with different risks). This is more relevant if you are closer to retiring but after chatting to my dad who works in finance, I decided to go for Level 2 which is has a little more risks than level 1 (but not as much as 3 and 4) and hence more potential return. Again, you can change this easily as you go along.

On your dashboard, you’ll see the section where you add your contributions. This takes moments to add and alter (you can change both the amount and the date it comes out of your account). I eventually went for £30 month which I know won’t lead to a huge pension pot but I decided to start with an amount I knew I wouldn’t miss each month, then as I return to work properly over the next few months I will hopefully have a bit more idea of my earnings and will be able to easily up the amount I put in. It’s really reassuring that you’re not at all committed- you can pause at any time.

Top Tips for Starting a Pension (and free money!)

-If like me, you’ve been thinking of starting a pension then it’s really easy to get started. In fact, Penfold has given me a code that will instantly give you £25 in your pot to get you started! Simply click here or enter JENNAFARMER1 when you create an account. That’s £25 towards your pension that you literally don’t have anything to do for, so why not give it a go!

–Don’t forget those old pensions! With most of us moving jobs every few years, chances are you’ve got a few pots scattered about. Penfold can usually find these pensions and add them to your account, even if you don’t have all the info to hand!

–Even if you can’t commit to anything more than a fiver a month, it’s worth creating an account. There’s no minimum amount to contribute with Penfold (and you don’t need to contribute every month) but remember the Government will top up your contributions if you’re a taxpayer; so for every £100 you contribute, they’ll add £25. This soon adds up.

A final disclaimer for those signing up: With pensions, as with all investments your capital is at risk. Pensions are a long term investment and the value of what you put in may go up as well as down