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‘I went self-employed but need help with my pension’

11 June 2024

This reader has several pension pots from former employers and is wondering how to amalgamate them.

By Emma Wallis,

News editor, Trustnet

Making a career switch is a brave thing to do, especially if taking the plunge and becoming self-employed. There are a litany of things to think about but your pension is probably not one of the first things that comes to mind.

After an office-based career spanning two decades, Louise decided to change direction in her forties and retrain as a yoga teacher, but having made the switch she is now wondering how best to save for her retirement given her relatively-new self-employed status.

She is already ahead of the curve in planning for her future, given that only 20% of self-employed people are saving into a pension plan, according to Hargreaves Lansdown. Furthermore, Louise is fortunate enough to have a final salary pension fund, having previously worked in the public sector, as well as a defined contribution pension fund from her previous full-time private sector job.

She now supplements her teaching income with short-term corporate contracts and these part-time jobs come with pension payments. This has left Louise with several different pension pots and she is considering how best to amalgamate and manage them.


How much should Louise save into her pension?

Lena Patel, a director and chartered financial planner at ISJ Independent Financial Planning, suggested that Louise start by considering what income she needs in retirement, what kind of lifestyle she wishes to lead, and when she intends to retire.

She might prefer to have a phased retirement, continuing to work part-time to supplement her income, Patel added.

Rob Morgan, chief investment analyst at Charles Stanley, suggested one way of doing this is to use an online pensions calculator to help decide how much to save and to see how increasing or decreasing contributions would impact the overall pot.

The calculator will work out what level of retirement income Louise has already accumulated in her existing pension funds and state pension, and how much more she needs to save to meet her goals, he explained.

To give some context around what sort of annual income Louise might need in retirement, the Pensions and Lifetimes Savings Association (PLSA) states that a single person would need £14,400 for a minimum standard of living and £31,300 annually for a moderate lifestyle, including owning a car and having a fortnight’s holiday abroad each year. The full state pension of £11,500 for 2024-25 goes some way towards this.

As a recently qualified yoga teacher, Louise is still building up her business, so can only afford to put a small amount aside each month to save for her retirement, but she anticipates that her monthly contributions will grow over time.

With that in mind, Patel recommended considering other savings vehicles such as ISAs to give Louise the flexibility to access her savings in case of an emergency. ISAs do not have the same tax benefits as pension funds but that is less meaningful for very small amounts and liquidity might be more important, she noted.

Morgan countered that the tax relief on contributions makes pensions an attractive way to save. “For basic-rate taxpayers, the government adds 20% to whatever you contribute. If you’re a higher-rate taxpayer, you can claim up to an additional 20% through a tax return,” he said.

“In addition, you’ll benefit from tax free returns while the pension fund invested, only paying tax when you take money out. Currently the first 25% is tax free up to a certain limit.”


What’s the best way to consolidate various pension pots?

Experts recommended that Louise consolidate her defined contribution pension pots from various employers into one place to make it easier to manage them and ensure nothing gets lost. They agreed that she should keep her final salary pension untouched, however.

Morgan said: “The transfer starts with an application process to the provider you want to transfer to, and they do the legwork for you from there.”

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, advised that “before consolidating, it is important to make sure you aren’t losing any important benefits such as guaranteed annuity rates or landing yourself with high exit penalties”.

The next question is where to pool Louise’s retirement savings. Patel said the simplest solution might involve moving everything into one of the workplace pension schemes that Louise already has, although she should check that the risk profile and investment strategy of the scheme are suitable. Morgan said she might consider consolidating into the best value plan.

Another option would be opening a self-invested personal pension (SIPP). SIPPs give people control over how their retirement savings are invested, but they may only suit people who want to proactively take investment decisions and who have the time and inclination to do their own research.

Louise does not have any prior investment experience and she is looking for some guidance. Therefore, a ready-made fund solution, either within a SIPP or another type of personal pension, might be more suitable, Morgan said.

Morrissey added: “In terms of choosing where you are going to consolidate your pension then it’s important to consider factors such as cost, investment choice, service and support. SIPP/pension providers will offer fund options aimed at those who are unsure about where to invest.

“Ongoing support is hugely important in terms of helping people build confidence in managing their pensions. Some providers will offer webinars, articles, research and even access to financial advice if required.”


How should the pension portfolio be invested?

Patel recommended a high allocation to equities to maximise returns, given that Louise has at least a decade to ride out stock market volatility. She is in her mid-to-late forties and would not be able to access her pension until the age of 57.

Morgan concurred: “My suggestion here is not to be too risk averse. Maximising exposure to equity markets should build wealth better than other lower risk areas, albeit at the expense of greater shorter-term ups and downs. Given the long time horizon until retirement age and continued regular contributions, it’s worth embracing that."

Morgan also suggested delegating asset allocation decisions to a multi-asset fund that covers all the major markets and regularly rebalances.

If you would like your financial situation reviewed by experts, please get in contact with the Trustnet team. You can reach us by emailing

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