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With the cost of doing business impacting independent retailers as much as the cost-of-living crisis is impacting consumers, some store owners may be tempted to cut back on their own pensions provision. But such a move would be a false economy, argues the government-backed Money & Pensions Service, which provides free, impartial advice.
Why save into a private pension?
Your business may not provide you with a retirement income or a lump sum at retirement, so saving into a private pension is recommended. The state pension alone is unlikely to provide you with enough money to maintain the standard of living you would like, while saving into a private pension is one of the most tax-efficient ways of saving for retirement. Further advantages include added security if you are forced to give up work earlier than you expect due to ill health or caring responsibilities, while in the event of bankruptcy, your private pension pot is likely to be protected. In addition, you can access your private pension earlier than the state pension (currently at age 55).
Choosing a pension scheme
Defined contribution schemes include personal pensions, stakeholder pensions and self-invested personal pensions (SIPPs). You build up a pot of money by paying regular and/or one-off contributions. The value of your pension pot over time will depend on the amount contributed, how investments have performed and charges applied by your provider. The best advice is to speak to a regulated financial adviser, who will look at all your financial circumstances. You can speak to your bank, building society or insurance company. They may offer pension schemes or signpost you to a trusted organisation. Otherwise, you can look for an adviser online. If you decide to do this, make sure the company is regulated by the Financial Conduct Authority by visiting Financial Conduct Authority or calling 0800 111 6768.
Guidance for business owners
If you run your own business, you have the option to make both personal contributions and employer contributions depending on the nature and level of income from the business. A company contribution is a business expense and would normally be allowed as a deduction against trading profits for corporation tax purposes. Speak to your tax or financial adviser to see whether it is appropriate to make contributions on this basis.
Employer pension responsibilities
Anyone who employs staff must follow automatic enrolment regulations. These apply to all UK employers and state that you must either automatically enrol workers or allow individuals to join workplace pension schemes that meet minimum standards.
For further information on automatic enrolment, visit the MoneyHelper website or The Pensions Regulator.
State pensions and NI contributions
You need at least 35 years of “qualifying” national insurance contributions to receive the full New State Pension of £9,627 a year (2022/2023). You need at least 10 years of qualifying NI contributions to be eligible to claim any New State Pension. If you don’t have a full NI record, you may be able to pay voluntary contributions to increase your pension. You can get a state pension forecast online at www.gov.uk/check-state-pension or by calling the Future Pension Centre on 0800 731 0175. You can also visit www.gov.uk/state-pension-age.
Further Information
MoneyHelper provides free, impartial money and pensions guidance over the phone and online. For further information, click here or call 0800 011 3797. Alternatively, use the webchat at here.
The service can also carry out a Midlife Pension Review, providing you with impartial guidance to help pension planning and suggest the next steps.
You can arrange a free telephone appointment with a MoneyHelper pension specialist by emailing virtual.appointments@moneyhelper.org.uk with your name, your telephone number and your email address.
