Freelancer Pension: A Guide

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Being a freelancer may come with a lot of perks, but unfortunately, an automatic workplace pension isn’t one of them. While employees at a company can sign up for their company’s pension scheme, freelancers are in charge of arranging their own pension and putting aside money to contribute towards their future.

  1. Do freelancers receive a pension?
  2. Freelancer pension: which one is right for me?
    1. State pension
    2. Private pension
    3. Other types of pension plans
  3. How do I choose the right freelancer pension?
    1. Contribution limits
    2. Fees
    3. Investments
    4. Management
  4. Tips on how to save for retirement
    1. Set goals
    2. Spend less
    3. Diversify
    4. Contact an investment professional

Do freelancers receive a pension?

The short answer is yes, freelancers are eligible to receive a pension, depending mostly on the country in which they reside. For example in countries like the UK, freelancers are entitled to the state pension if they have made several national insurance (NI) contributions over the years. 

Likewise, in the US, self-employed individuals are eligible to open and contribute to a SEP IRA (Simplified Employee Pension IRA).

Types Of Freelancer Pension
Types Of Freelancer Pension

There are also private pension options available for freelancers who are looking to have money on top of their state pension.

Freelancer pension: which one is right for me?

As stated above, there are options available for freelancers looking to secure a pension. These can be seen as follows:

State pension

Depending on where you work, you are entitled to a public/state pension as a freelancer. In the UK, the state pension is part of the government’s pension arrangements and is a weekly payment that you receive when you reach state pension age. The pension is £179.60 per week, however, the actual amount depends on your National Insurance (NI) record. It is usually paid every 4 weeks into an account of your choice. 

Similarly, in Spain, self-employed individuals can now benefit from a state pension of €377.92 more per month, if they contribute €144.49 more to Spain’s social security system.

In Portugal, freelancers can benefit from contributions if they register with social security and make payments on a monthly basis. In addition, those living on green receipts can also benefit from a retirement pension once they turn 66. 

Keep in mind that the state pension is unlikely to be enough for you to live comfortably on. It is therefore advisable for you to obtain an additional private pension.

Private pension

Private pensions are a type of pension that you can set up on your own to help you save money for retirement. These types of pensions are the most popular with freelancers, mostly because of the number of options available to choose from.

Another reason is because these pensions have the ability to grow over time, thereby increasing your pension pot.

The best part about these systems is that they can be personalized to suit your needs. You can choose a private pension system that is shaped in accordance with your standards and expectations.

Other types of freelancer pension plans

As mentioned above, the type of pension plan that you can sign up for depends primarily on where you live. In the US, for example, apart from government pension and personal pension, freelancers can also make use of Solo 401k plan or a defined benefit plan.

Likewise, if you reside in the UK, you can make use of a defined benefit plan or a defined contribution plan. 

How do I choose the right freelancer pension?

Choosing a pension plan that’s right for you involves comparing the details of different plans available to you. Here are a few things you should consider when doing so:

#1 Contribution limits

Before choosing a plan, make sure you look into the maximum and minimum level of contributions allowed.

Since freelancers often have irregular income, you’ll want to check if you have to make regular payments or if you can vary how much and when you pay.

#2 Fees

This is perhaps the most important factor to consider when choosing a pension plan. Some plans have annual fees that cover the cost of running and administering your pension scheme whereas others can include additional fees such as administration fees, transfer charges, charges for managing your investments, penalties, etc.

#3 Investments

When choosing a plan, you will want to check whether there is clear information about where you can invest your contributions and how. 

Make sure you are happy with the level of risk you are taking and also that the scheme offers the right range of investments for you.

#4 Management

Lastly, you will want to choose a plan that offers help and support and allows you to monitor your investment options. For example, is there an online account? Can you check your balance and make contributions online?


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Tips on how to save for retirement

One of the most important things you can do for your future is start saving for retirement as soon as you can. This is because the sooner you begin saving, the more time your money has to grow.

Not sure how to start saving as a freelancer? Check out these tips:

#1 Set goals

The first step and perhaps most important step to saving for retirement is setting goals. By creating a clear action plan, you will be able to decide how much you need to start saving. When creating goals, take into account your lifestyle, timeline and retirement savings plan. 

Also remember to track and review your goals. This will help you stay focused and let you know if you are still on the right path.

#2 Spend less

This may seem like an obvious tip but you’ll be surprised to learn just how many people don’t follow this rule. Spending less money than you make allows you to invest your money for long-term growth and can also eliminate any debt that you may have.

Begin by creating a realistic monthly budget. This will help you prioritize your spending and help you keep track of the money that’s going in and out of your bank account. 

#3 Diversify

As you save for your retirement, be sure to spread your savings across several platforms and mediums. Diversification will help you reduce the amount of risk you’re exposed to in case of a bad event and may actually improve your potential return.  

#4 Contact an investment professional

Knowing when and how to retire can sometimes be hard to determine, especially if you work as a freelancer. If you find yourself getting overwhelmed, perhaps it’s time to contact a professional. 

Get in touch with other freelancers or ask your friends for recommendations on who they use. A good advisor will set up a retirement plan that fits your budget and lifestyle and will minimise your stress by taking the burden off of your shoulders.

How are you planning for retirement? Let us know in the comments down below!

Natalia Campana

Natalia is part of the international team at freelancermap. She loves the digital world, social media and meeting different cultures. Before she moved to Germany and joined the freelancermap team she worked in the US, UK and her home country Spain. Now she focuses on helping freelancers and IT professionals to find jobs and clients worldwide at www.freelancermap.com

2 comments

  • Natalia
    Puedes comentarme, que es más beneficioso para una persona como yo que tengo 59 años, donde puede hacer aportes a pensión y si es benéfico o no, para mi.

    • Hola Rodrigo, muchas gracias por leer nuestro artículo. Tener ahorros o un plan de pensiones para un futuro siempre es beneficioso. No conocemos en detalle su situación ni dónde reside pero, a parte de la pensión del estado, podrá crear un plan de pensiones privado o ahorrar cada mes por su propia cuenta una cierta cantidad de dinero.

      No somos especialistas en pensiones así que le recomiendo contactar con agencias especilizadas en su país.

By Natalia Campana

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