Hey Freelancers! You Need Pensions Too

...We have one straightforward objective: We’re simplifying pensions for the UK’s self-employed workforce.

People just don’t work in the same way they used to. Tribes? The Gig Economy? Career Contractors? It all points to the same thing: that self-employment is now a central part of the labour market that can’t be ignored. 

Today more people are choosing to be independent and/or freelancers, and the UK’s rising tide of self-employed workers shows no signs of abating. In fact, with the gig economy growing rapidly, and corporates under pressure to reduce the costly obligations of traditional employment, there’s a chance we’re on the brink of a tectonic shift in the way we’re expected to work.

There’s nothing new about being self-employed, but it’s always come with a sort of stigma attached. That’s changed. Freelancing or working for yourself is no longer a niche career choice. Did you know that there are already 5 million people in the UK that are registered as self-employed? Possibly. Did you know that the financial needs of these workers are often neglected by established banks, insurers and pension managers? If not, you really should.

The problem is this: many of the UK’s self-starters, doers, and hustlers are being told by established financial institutions that they don’t tick enough boxes. Don’t believe us? Ask a freelancer about their first mortgage application, or how long it took them to finally set up a pension. Watch the smile fade from their face.

We were particularly puzzled by the pension problem. I mean, how hard can it be? Pensions are pretty much the same as they’ve always been and people are largely aware of the importance of long-term savings, tax reliefs and the relatively low risks of investing in a pension. But only 18% of self employed workers are contributing to a pension pot. That is alarmingly low.

So what’s the blocker? Well, whilst regular employees are being spoon-fed “silver platter” pension programmes, setting one up by yourself seems to give people the heebie jeebies.  And it’s understandable why:

1) Freelancers have varying incomes, and prefer not to commit to fixed monthly contributions.

2) There are way too many funds to choose from, all explained in confusing financial jargon.

3) They are deterred by the DIY registration process - it’s clunky.


And to compound the problem, pensions aren’t perceived as urgent, especially for younger people who have less disposable income than any generation since the moon landing (thanks, baby boomers!). So, when confronted with an awkward registration process and confusing acronyms, many simply kick the can down the road. We don’t blame them.

So that’s where Peasy enters the picture. We have one straightforward objective: We’re simplifying pensions for the UK’s self-employed workforce.

Peasy is working with trusted partners to build a pension platform that can meet the needs of freelancers. Fewer fixed obligations, no confusing jargon, and a customer experience that won’t make your head spin.

We’re just getting started and we would love to hear from you. Freelancer pensions have been ignored for too long and it’s about time we change that. Just because you’re not in the rat race doesn’t mean you won’t get trapped.

Join us. What do you say?

 

If you'd like to connect with us directly, don't be shy and give us a shout at hello@peasypensions.co.uk

Calling All Freelancers: Should You Set Up A Pension?

When it comes to pension plans, freelancers are all alone. No access to corporate pension schemes or support staff to walk through the perks of enrolment. Without someone to hold their hand, the UK’s self-employed workforce have remained notoriously “under-pensioned”.

So, even without the cozy pension plans, why should every freelancer be contributing to a pension pot?

We’ve jotted down a few important benefits along with some basic examples.

The Eighth Wonder Of The World

“Compound interest is the eighth wonder of the world. He who understands it, earns it...” -Albert Einstein

Compound interest is the addition of interest to your investment, or the interest on interest. It is the result of reinvesting interest, rather than paying it out.

Example: Meet Jessica and Samantha. Both invest in a fund that yields 5% per year. Jessica invests £1,000 at the age of 25 and Samantha invests £1000 when she is 40. Due to compounding, Jessica’s financial gains will be reinvested over a longer amount of time. When Jessica retires at the age of 60, she will have £5,516 from that original £1,000 investment. At 60, Samantha will have £2,653.

Mr. Einstein was onto something.

Pensions are long-term investments, and  even modest contributions are amplified in the long run.

Tax Relief Anyone?

Pension contributions are tax deductible and really easy to file with HMRC.

Example: Joey belongs in the 40% tax bracket and contributing £1,000 to his pension every year. Joey is eligible to receive £400 in tax relief (contribution x tax bracket) when he completes his HMRC self-assessment.

Living Off Earnings

Let’s be real. Money isn’t everything, but it’s never fun to count pennies. You’ll need a sizable pension pot to comfortably live off the earnings whilst you retire in the sun.

Example: David, aged 65 has recently retired and receives £155.65 a week from the basic state pension (£8,094 a year). David needs around £30,000 a year to live well (an additional £22,000 approx.) and is collecting 3% in annual income from his pension pot. David needs a pension pot of £730,000 (3% x 730,000 = 22,000) to reach his yearly income goal.

Lucky for David, he’s been contributing into his pension for a long time and can comfortably retire. Bravo David!

These estimates vary based on lifestyle, assets, marital status, but you get the idea. Start saving early. Also, if you think your savings can never amount to a sizable pension pot. Re-read compounding above.

Withdraw Your Cash Early (ish)

Many people believe their money is sitting in a secret vault until they are 65. That’s not entirely true.

Example: Danielle, aged 55, wants to withdraw cash from her pension pot to buy a condo in Spain. She found a great deal, wants to close the purchase promptly, and prefers to buy it cash. As of the age of 55, Danielle is legally allowed to retrieve her entire pension pot as cash, with the initial 25% being exempt from taxes.

This is rarely recommended as you forfeit a regular income stream, but certainly feasible if ever you need the money early.

We could go on for days, but too much pension talk tends to put people to sleep. Let’s not do that. This is just a short blog post and there are so many more topics to discuss. If you have any questions- the team at Peasy Pensions would love to hear them.