I know the pension versus Isa debate inside-out, back-to-front and upside-down. I know you should have rainy day savings, tax-efficient savings and savings for retirement. I know, okay?
But thinking about retirement is very difficult when it’s still at least 40 years off. I have trouble doing a weekly shop because I can’t think ahead to what I might want to eat in three days’ time – how am I supposed to plan for a retirement that may never come?
Company pension schemes are, doubtless, a wonderful thing.
While it is, of course, sad that my generation no longer have a wonderful gold-plated pay out to look forward to, I think it’s great that employers are happy to/forced to [delete as appropriate] contribute to the futures of their staff.
Pension guru Steve Bee (he does great cartoons on Twitter, if you don’t follow him) once pointed out that every four weeks of your salary has to last around six weeks of your life. That terrifying factoid has always stayed with me since.
And my other very simple argument to anyone I’ve ever encountered who has opted out of their company pension scheme without good reason has always been: it’s free money.
It’s money you can’t otherwise get – an extra 1 per cent, at least, of your salary. Take it – don’t be a fool!
It’s also money that is helpfully siphoned off out of your pay packet before you even see it, which makes it incredibly easy to part with.
All you see is an annual statement telling you how much you’ve got. And while you might not be a millionaire it does sort of feel like magic money.
But self-employed people don’t have someone topping up the kitty. They don’t have a handy dandy default fund all ready to go, and they don’t have an accounts department to siphon off regular amounts out of their salary – they don’t even have a regular salary from which to take those regular amounts.
Retirement is hard for anyone in their 20s or 30s to conceive. It feels like an alien concept, a million light years away in the future.
The new lifetime Isa could offer an appealing alternative. I think some of the most intimidating things about pensions are that you can’t get the money and it’s not all that visible (at least for someone like me who never bothered to learn how to log in to her company pension account).
But would that accessibility and visibility also be a downside? Being able to see a growing (hopefully) pot of money, it would take an incredible amount of discipline to resist the urge to dip in if you were ever in need. Even if there are penalties, such as losing your 25 per cent bonus, if you need cash you’ll be willing to take the hit.
Then again, I’ve managed to leave my stocks and shares Isa alone for the past few years. Well, with minimal tinkering anyway.
I think, at least for now, keeping any savings I have easily accessible is going to be the best strategy. Once I prove I can actually keep a roof over my head while self-employed, then it might be time to start thinking about the future.
What are all the other freelancers out there doing?