Have you ever felt that there are no pension options when you are no longer full-time employed? Although workplace pensions are the most common way of contributing towards your pension, private schemes are also available and can provide flexibilities to enjoy. NEST is one of the safe pension schemes that support the self-employed with their pension plans.

NEST (National Employment Savings Trust) is a government-backed workplace pension scheme that self-employed individuals in the UK can also join, and they can self-manage their own contributions. In the scheme, self-employed members can pay contributions as frequently or infrequently as they want, with a minimum payment of £10 per contribution.

Private pension schemes allow individuals to adjust, pause, or increase contributions depending on business performance or personal financial situation.

Tax Efficiency

For the self-employed, pension contributions are not deductible as business expenses when filing self-assessment tax returns. This means they do not reduce the taxable profits of the business and are not treated as a tax-deductible expense in the self-employed section of the return. HMRC instead allows a 20% basic rate tax relief on contributions paid into a private pension (a “tax bonus”) on filing their tax returns. Contributions qualify for tax relief up to 100% of relevant UK earnings, with an annual limit currently at £60,000.

Where you use your limited company, contributions can be tax deductible as a business expense on condition that the contributions are made wholly and exclusively for the purposes of the business. The company is allowed to contribute up to the government’s annual allowance of £60,000.