NEST pension scheme for self-employed - a quick-start guide

Are you self-employed and looking to contribute to a pension scheme? The earlier you start saving, the quicker you’ll build up a pot for retirement - and, happily, saving for a pension is also tax-efficient.

NEST is one of the best-known pension schemes in the UK. But what is NEST, and how do you join it as a self-employed person?

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NEST pensions - what are they?

NEST is a government-backed pension scheme set up to make sure that every employer can easily access a workplace pension scheme. This is particularly important since the phased introduction of auto-enrolment, which radically changed employers’ pension responsibilities.

The NEST scheme is easy to use, with 24/7 access online. It also claims to be one of the best-value pension schemes available, and offers a single fee scheme to make it easy to understand how much you’re paying in order to save.

There are many alternatives to NEST available, including a number of new app-based pension schemes. While NEST is a popular choice, you should make sure that you do your own research to check which pension provider is right for you.

Self-employed private pension - can I get one from NEST?

NEST is best-known as a workplace pension scheme. However, self-employed people can also save with a NEST pension.

NEST pensions are available to both self-employed sole traders and the sole directors of companies with no employees.

However, it’s important to understand that if you employ anyone, you will have separate obligations with regard to workplace pensions. You should make sure that you seek advice from a qualified professional to understand your pension position if you’re an employer.

Setting up a pension with NEST as a self-employed person

There’s a number of good reasons why you should consider contributing to a pension scheme when you’re self-employed.

The primary one, of course, is in order to save for retirement. The state pension is not particularly generous, and some self-employed people find that they have difficulties when retiring because of gaps in their National Insurance contributions.

To make sure that you have a comfortable retirement, it’s important to start saving.

As well as that, saving in a pension is tax-efficient. Pension contributions receive tax relief, with basic rate taxpayers normally receiving an extra £25 from the government for every £100 they save. You can read more in our guide to pensions for the self-employed.

To set up your pension with NEST as a self-employed person, you need to follow these steps:

1. Check that you qualify as self-employed for NEST’s purposes using their checklist.
2. Make sure you understand the rules around contributions. You can contribute as much as you like to your pension, but if you exceed certain thresholds you’ll have to pay more tax. Read details of the annual allowance and lifetime allowance on the .GOV website.
3. Sign up as a self-employed NEST member. You can use the NEST sign-up form [here.
4. Set up your contributions. You can contribute as much and as frequently as you like. The minimum amount for each contribution to a NEST scheme is set at £10. You can make contributions either by Direct Debit or on a one-off basis. To make contributions, log into your account. You’ll receive your account details after you’ve signed up.
5. Understand what happens if you become employed. If you switch from self-employment to employment, you can still keep your self-employed NEST scheme, and you can even continue to contribute to it. Even better, you can ask your new employer to add your new contributions to your existing pot.

What about auto-enrolment for the self-employed?

You may have heard of auto-enrolment - the new requirement for all employees to be enrolled in and contribute to a workplace pension scheme.

There was some confusion regarding whether or not self-employed people would also be affected by auto-enrolment, but as it stands, self-employed people are not legally required to enrol in a workplace pension scheme.

However, that doesn’t mean that you shouldn’t save. As we’ve already seen, contributing to a pension scheme is a good idea for a number of reasons.

Remember, though, that NEST is not the only option. Make sure you do your research to understand the different types of pension on offer. For a comprehensive introduction to pensions, visit the Pensions Advisory Service.

Are you saving for your pension? Tell us about it in the comments