Pension planning for the self-employed

Assessing your pension needs

Before you choose a pension scheme, try to work out how much money you'll need each year in your retirement. For most people, retirement comes at a time when they no longer have major outgoings such as a mortgage and, therefore need less money to live on. However, as you get older, you need to consider the possibility that you will be faced with other expenses such as help around the home. In order to have some idea of how much pension you'll need when you retire, you need to consider the following:

• The age you intend to retire. In general, because pensions are payable for life, the earlier that someone retires the lower the pension. It is important to have a good idea of when you would like to retire as this will determine how much you need to pay into your pension on a regular basis.
• How much basic State Pension you will get.
• What your basic living expenses will be.
• Whether you are likely to have any dependent children.
• The lifestyle that you would like to have in retirement - for example, where you want to live, travel and hobbies.
• Other assets you may have such as savings, investments and property.

If you've already got a pension, how much income will it give you at retirement?
You can ask your pension provider for a statement showing how much your existing pension is likely to pay at the age you intend to retire. This will help you decide whether or not you need to increase your pension payments in order to meet your retirement expectations.

However, it's hard to arrive at a reliable figure because the cost of living is likely to have changed by the time you retire. That is why it is important to review your pension arrangements regularly.

Subjects covered in this guide

• Introduction
• Assessing your pension needs
• How a personal pension works
• The basic State Pension
• Stakeholder pension
• The difference between a stakeholder pension plan and a personal pension plan
• Other pension products
• Other tax-efficient savings
• Transferring your pension
• Keeping track of your pension