Laith Khalaf, analyst at leading pension provider Hargreaves Lansdown, advises one reader on how to get the most of his pension plan as a self-employed, single operator.
Problem: "My previous employer had set up a pension plan for me, but I have recently left them to start up my own Italian restaurant in London. Now I'm operating on my own I'm concerned about how to get the best rate on my pension. What should I do and where should I look?" - Clive Brown, London.
Solution: Leaving a job and starting a new career is definitely a good time to review your pension arrangements. First of all assess the pension with your previous employer. If it is a final salary scheme it is almost certainly worth leaving it where it is. But if it is a money purchase scheme like a Group Personal Pension you might consider transferring it to a new plan.
Take a look at the charges you are paying and the investment options available to you within the scheme. Sometimes once you leave an employer the charges on your scheme go up. The investments are important too; many personal pensions contain at best mediocre funds run by an insurance company. Some plans are better than others in this respect but in any case it pays to monitor your pension investments to make sure they are up to scratch. If you are happy with the arrangement, leave it where it is but keep an eye on it. If you aren’t happy with it you can transfer out to a new pension plan.
If you want to make your own investment decisions and want access to a full range of funds you might consider a SIPP (Self Invested Personal Pension). These plans typically offer you online access to your pension too. Be wary of the charges you pay here; some SIPPs are very pricey though some are available at low cost too.
As well as your old company pension you should also consider making pension contributions going forward. If you are self-employed this could mean paying less income tax. If you have set up a limited company you could even get the company to pay into your pension and you wouldn’t have to pay income tax or national insurance on those contributions, unlike if you took that money as salary. In most cases you can also treat the contributions as an expense to reduce your corporation tax bill.