Pension savings are funds you set aside for your retirement. For freelancers, this is a self-managed responsibility, unlike traditional employees who often have company pensions.
What is Pension savings?
Pension savings are money you invest during your working life to provide an income when you retire. It's a long-term financial pot designed to support you when you are no longer earning a regular income from work.
Why is this important?
As a freelancer, no employer is automatically contributing to your pension. Without proactive savings, you risk having little to no income in retirement. Starting early is crucial due to the power of compound interest over decades.
How does it work?
You open a personal pension plan, such as a private pension or a self-invested personal pension (SIPP). You make regular contributions, which are often invested in funds. The money grows tax-free until you withdraw it in retirement, subject to rules.
Pros and cons
Key advantages include tax relief on contributions and long-term growth. The main challenges are the need for self-discipline to contribute regularly and the investment risk involved. You also bear all the setup and management costs.
Conclusion
Building pension savings is a non-negotiable part of freelancing. By starting early and contributing consistently, you take control of your financial future. It's a key step towards a secure and independent retirement.
Ready to freelance?
Download the HFS Freelancers app and discover flexible shifts in your area. Or explore more terms in our knowledge base.
