Lisa Inkpen

The whole idea of a pension is that during your earning years, you put a bit aside to sustain you once you are too old to work. At this very basic level, everyone who is earning should be saving for retirement and the government is keen to encourage us with generous tax bonuses because they do not want us dependent on state benefits in our dotage.

The deal is you get back the income tax you paid on earnings that you put in a pension. So if you are a basic rate taxpayer and you pay £100 into a pension, you get a bonus of £25 added to your investment from the tax man – not bad!

If you were employed, you would automatically be enrolled into your employer’s workplace pension. At least 8% of your earnings would be invested into the pension pot of which you would pay 4%. With no employer to share the load I am afraid it is all down to you, but this 8% of earning is a good starting point.

You cannot access your pension before age 55 – even if you are desperate! So it is important to have an alternative and accessible pot to cover preretirement emergencies and spending plans.

As a freelancer you are looking for a Personal Pension and there are hundreds of providers eager to sell you their plans, but remember it is not the provider of the pension wrapper that is the most important factor – it is the investment option you choose within the wrapper. Make sure the wrapper you buy gives you access to investments that suit you and what you’re trying to achieve.

Pensions offer a unique tax bonus that make an unbeatable option for long term investment. Pay in at least 8% of your earnings and when choosing your pension provider start with making sure you get access to the investment option that suits you and then find the cheapest wrapper that gives you access.

This information is not intended as an alternative to personal financial advice and it may well be worth getting some specific advice on the best pension for your needs and the optimum level of contribution.

Did you Know that as a member of the Teacher’s Pension Scheme that your employer will contribute 23.6% of your salary to you pension?

This means if you are earning £36,961 (M6) per annum as an example, that your employer will contribute £8723.

So how does this compare to the private sector?

Well, on average you could expect to receive an employer contribution of between 7% and 14% with some employers particularly larger organisations offering very high pension contributions as a generous employee benefit.

The employer contribution to the TPS does seem generous in comparison but let’s not forget that a teacher’s salary has not kept up with inflation and according to the Institute for Fiscal Studies (IFS) they estimate that teachers will see a pay cut of 14% from 2010 to 2023.

So, what does this mean for you?

As a new starter to the profession, you will be automatically enrolled into the pension scheme although you do have the option to opt out. In opting out it is important that you understand that you will be missing out of your employer’s contribution (not to mention the loss of tax relief and the other benefits that come with the TPS).

Likewise, if you are thinking of leaving the profession you may want to consider the value of the employer pension contribution when making the decision.

As women, we juggle many events throughout our lives -

Not only do we care for our families, we often take on caring responsibilities, taking time out of work, or working part-time to look after loved ones. All of these things can disrupt our future plans and disproportionately disadvantage our financial future.

By planning NOW you can take control of your finances to build a robust and secure future for yourself and your family. You'll be better informed and able to make the decisions that are right for you. Join me for a free 15 minute discovery call, I'd love to talk to you.