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How to secure your financial wellbeing now and in the future

How to secure your financial wellbeing now and in the future

In part 1 of our financial wellbeing series with Rachel from Penfold and Laura Ann Moore, we explored your personal money story. We learned about the balancing act between spending and saving and how to find what works for us.

Now, Rachel introduces us to the importance of pensions as part of mindful spending and future-proofing our finances. While many people say that pensions are overly complicated and confusing, it needn’t be the case. Some providers will try to catch you out, meaning that retirement can feel like a hard abstract thing to pin down.

“Penfold is built with self-employed and freelancers in mind to break down barriers. We want to break down barriers and help you to get started! We want to help you keep your retirement goals on track and make them simple and easier to understand.”

A pension is about saving enough now to have financial wellbeing and freedom later in life to stop working when you want to do and do what you want with your time.

The best way to do this is with a pension as it’s a long term saving product, and you can use the magic of compound interest! For example, if you leave it for 30 years, it can grow and grow!

Key points to consider about a pension

When opening up a pension, there are three key things to think about:

  1. The government provides us with a state pension from the age of 69, which is about £9K as long as you have been paying your national insurance for 35 years.
  2. The government adds a generous tax top up when you pay into a personal pension plan.
  3. Make the most of the secret weapon of compound interest and the growth you can achieve on the money you save!

If all of this sounds over your head, don’t worry!

Penfold specialises in breaking down the elusive pension barriers. A tax top-up occurs when you are a self-employed taxpayer. They will add 25% of what you have paid into your pension, and if you are a high tax ratepayer, you can have 50% extra as you can get money off your tax bill! These are applied relatively automatically if the money has come from a personal pension contribution, so you don’t need to do anything more to receive these actively.

As a limited company, you can also take money out of your business tax-free by putting it into your pension. This money then is classed as a business expense and so reduces your corporate tax overall. Note that this money is then locked away until you are 55 years old, so you have to make sure that you don’t want to access the money before then.

When should I start saving?

When thinking about starting a pension and your financial wellbeing for later life, it can be daunting to think about the amount of money you should accumulate to live off comfortably – but the compound interest does a lot of the hard work for you. The earlier you start saving, the better position you might be in later in life. That said, you can never leave it too late; it is always essential to get started. Even if you start small, you are giving your money a bigger chance to grow, and you won’t have to add in more and more money later on if it is already growing.

How much should I save?

There is no correct amount to save each month or year. The amount you choose is a personal decision, and Rachel encouraged us to think about a few things. What do you want to achieve? What are your financial plans over the next few years? When would you like to retire? What life do you want to live while retired/not working?

A general rule of thumb to work out when and how much you should save is:
half the age you’re at when you start saving and put that % of your earnings into your pension each year, e.g. if you’re 20, start saving 10% each year.

Why are they so important when you are self-employed?

A lot of people nowadays are self-employed, so it’s crucial to take action for yourself. You might not be eligible for the full state pensions if you have previously limited your salary to reduce your tax and National Insurance.

If you have worked for a company, you will know that everyone in full-time employment has one set up for them by the HR team, but, being self-employed, you have to do this for yourself. It’s a good idea to treat yourself as your employee! Make sure you are offsetting your expenses and take advantage of these opportunities.

See Also

The fine print:

  1. There is a cap: you can pay up to £40K per year, or your earnings if lower than this.
  2. There are no minimum contributions.
  3. The first 25% is tax-free, and you will pay income tax on the other 75%.
  4. Pension freedoms: there is no one set way to take your pensions money anymore, so there is a lot more flexibility to fund your retirement. You don’t have to take it all in one go; there are many options and providers you can do that with, too.
  5. Transferring and combining pensions: while this can be a considerable problem (there is £20 billion or lost pensions in the UK as people forget to transfer them, move house or lose the names of their providers, to don’t estimate the value of your savings). Spend the time looking back at previous employers and their pension schemes and decide if you want to keep a few different pension pots or move them into one so you can track them more easily.

Money takes up a lot of our lives, and our actions today can influence the life we will lead in the future. We asked our money experts their favourite financial wellbeing practices to leave us all inspired to make a few changes to start our next financial chapter.

Rachel tries to save a small amount of money each month in a pot and see where it goes. Will it smooth out a future problem? Can I treat myself in the future?

Laura Ann is passionate about creating money dates with herself each week and talk about money -“I open up the conversations with myself and my friends. With myself, that means journaling, sitting down, asking myself questions and getting down to how I feel about myself. And with my friends, it means that we can build each other up and be honest with each other.”


You can read the first financial wellbeing article here and you can find out more about our experts, Rachel at Penfold and Lauran Ann Moore on their websites and social media @getpenfold and @laura_ann_moore.

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