Everything you need to know when it comes to your retirement savings
As a self-employed freelancer, many questions and completely new areas may arise that you normally take for granted as an employee.
Now you have to manage most (read: all) things yourself, and one of the big and controversial areas is retirement as a self-employed freelancer.
Is it necessary to set up a pension? How much should you pay into a pension as a self-employed person and which pension plan should you choose?
There can be several things to consider and many different opinions, but here you'll find more information about self-employment pensions so you can create your own and start saving for retirement.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 2,000 others with an everyday life without administration.
Set aside for the future
Being self-employed has many things to think about, and if you're just starting out, retirement might not be the first thing that comes to mind.
In fact, more than half of self-employed people end up saving less than 5% of their income for retirement.
As a self-employed freelancer, it's entirely up to you whether you choose to set up a pension plan or not.
As a self-employed person, you will be entitled to a state pension in the same way as everyone else, but since you are not an employee, you will not automatically have a labor market pension.
It's therefore a good idea to save up for retirement yourself, as the ordinary state pension is not enough for most people to have the future they dream of.
In general, it's recommended that you save enough so that what you will receive when you retire is about 80% of what you live on today.
However, when it comes to retirement savings, there are several options and different ways to do this, and it's important that you choose the option that suits you best and adjust it along the way.
Paying into a pension as a self-employed person
What is the right amount to pay into a pension?
It can vary from person to person and you can choose to set it according to the lifestyle you want to lead in retirement, your current age and desired retirement age, and how much you are able and willing to put aside.
As mentioned earlier, the rule of thumb is that you should put aside enough so that you will be paid about 80% of what you live on now.
However, as a self-employed freelancer, income can fluctuate - especially in the beginning.
Some self-employed freelancers therefore choose a pension plan where you can quickly and easily adjust your contributions from month to month or temporarily pause your pension savings.
This means that you can pay more in the months when your income is high and less when it is lower.
Depending on the pension plan you choose, there may also be a limit on how much you can contribute to your pension per year. For example, if you choose to set up an installment or terminable pension, you can contribute a maximum of DKK 59,200 with full deduction in 2022.
Different types of pension as a self-employed person
In addition to deciding how much you want to contribute to your pension as a self-employed person, you also need to decide which type of pension is right for you.
If you simply set the money aside in a regular bank account, there's a good chance it will lose value with inflation.
The vast majority of people therefore choose to invest their pension savings in, for example, shares, funds, securities or other investments through a pension plan.
This way, you can avoid inflation reducing the value of your savings over time and even earn a return and increase the pension you will receive in the future.
Essentially, there are 3 different types of pensions:
- Ratepension:
Installment pension is the most common pension savings. It is a private pension savings that will be paid out in installments (like regular salary) when you choose to retire.
- Annuity (lifelong or terminable):
A lifelong annuity pension is an insurance policy that provides you with regular payments for the rest of your life - no matter how long you live. If, on the other hand, it is terminable, it is similar to an annuity pension and is also paid out over a number of years.
- Retirement pension:
If you want your pension to be paid out in one lump sum, you should choose a retirement pension. Most often, people choose a retirement pension to supplement their annuity pension savings if they want to contribute more to their pension than the limit allowed for the annuity pension.
Most people choose the annuity pension, which is the most common form of pension savings.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 2,000 others with an everyday life without administration.
Get started - Create your pension savings
Unless you have a good grasp of the stock market and are ready to invest your retirement savings yourself, you can choose to either set up a savings account with a bank or a pension company.
The bank or pension company you choose will have professionals on staff to invest your pension savings for you based on your wishes.
Many people still prefer to have a say in what their pension savings are invested in, such as green energy etc.
Once you have created your pension savings, you can choose to set up an automatic transfer to make sure you get paid into your pension savings every month.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 2,000 others with an everyday life without administration.
Self-employed pension and tax deductions
Another benefit of having a pension savings plan is that you can now get a tax deduction for the contributions to your pension plan.
As long as you set up your pension savings with a bank or pension company, you can get a tax deduction for your pension contributions. This means that you can build up a pension for the future and pay less tax at the same time.
Once you have set up your pension savings and determined the amount you want to contribute each month, it's a good idea to enter this in your tax return as a tax deduction for the contributions.
Everything you need to know when it comes to your retirement savings
As a self-employed freelancer, many questions and completely new areas may arise that you normally take for granted as an employee.
Now you have to manage most (read: all) things yourself, and one of the big and controversial areas is retirement as a self-employed freelancer.
Is it necessary to set up a pension? How much should you pay into a pension as a self-employed person and which pension plan should you choose?
There can be several things to consider and many different opinions, but here you'll find more information about self-employment pensions so you can create your own and start saving for retirement.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 2,000 others with an everyday life without administration.
Set aside for the future
Being self-employed has many things to think about, and if you're just starting out, retirement might not be the first thing that comes to mind.
In fact, more than half of self-employed people end up saving less than 5% of their income for retirement.
As a self-employed freelancer, it's entirely up to you whether you choose to set up a pension plan or not.
As a self-employed person, you will be entitled to a state pension in the same way as everyone else, but since you are not an employee, you will not automatically have a labor market pension.
It's therefore a good idea to save up for retirement yourself, as the ordinary state pension is not enough for most people to have the future they dream of.
In general, it's recommended that you save enough so that what you will receive when you retire is about 80% of what you live on today.
However, when it comes to retirement savings, there are several options and different ways to do this, and it's important that you choose the option that suits you best and adjust it along the way.
Paying into a pension as a self-employed person
What is the right amount to pay into a pension?
It can vary from person to person and you can choose to set it according to the lifestyle you want to lead in retirement, your current age and desired retirement age, and how much you are able and willing to put aside.
As mentioned earlier, the rule of thumb is that you should put aside enough so that you will be paid about 80% of what you live on now.
However, as a self-employed freelancer, income can fluctuate - especially in the beginning.
Some self-employed freelancers therefore choose a pension plan where you can quickly and easily adjust your contributions from month to month or temporarily pause your pension savings.
This means that you can pay more in the months when your income is high and less when it is lower.
Depending on the pension plan you choose, there may also be a limit on how much you can contribute to your pension per year. For example, if you choose to set up an installment or terminable pension, you can contribute a maximum of DKK 59,200 with full deduction in 2022.
Different types of pension as a self-employed person
In addition to deciding how much you want to contribute to your pension as a self-employed person, you also need to decide which type of pension is right for you.
If you simply set the money aside in a regular bank account, there's a good chance it will lose value with inflation.
The vast majority of people therefore choose to invest their pension savings in, for example, shares, funds, securities or other investments through a pension plan.
This way, you can avoid inflation reducing the value of your savings over time and even earn a return and increase the pension you will receive in the future.
Essentially, there are 3 different types of pensions:
- Ratepension:
Installment pension is the most common pension savings. It is a private pension savings that will be paid out in installments (like regular salary) when you choose to retire.
- Annuity (lifelong or terminable):
A lifelong annuity pension is an insurance policy that provides you with regular payments for the rest of your life - no matter how long you live. If, on the other hand, it is terminable, it is similar to an annuity pension and is also paid out over a number of years.
- Retirement pension:
If you want your pension to be paid out in one lump sum, you should choose a retirement pension. Most often, people choose a retirement pension to supplement their annuity pension savings if they want to contribute more to their pension than the limit allowed for the annuity pension.
Most people choose the annuity pension, which is the most common form of pension savings.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 2,000 others with an everyday life without administration.
Get started - Create your pension savings
Unless you have a good grasp of the stock market and are ready to invest your retirement savings yourself, you can choose to either set up a savings account with a bank or a pension company.
The bank or pension company you choose will have professionals on staff to invest your pension savings for you based on your wishes.
Many people still prefer to have a say in what their pension savings are invested in, such as green energy etc.
Once you have created your pension savings, you can choose to set up an automatic transfer to make sure you get paid into your pension savings every month.
An easier freelance life with Factofly
Be a freelancer without hassle and get paid without your own CVR number with Factofly. We help almost 2,000 others with an everyday life without administration.
Self-employed pension and tax deductions
Another benefit of having a pension savings plan is that you can now get a tax deduction for the contributions to your pension plan.
As long as you set up your pension savings with a bank or pension company, you can get a tax deduction for your pension contributions. This means that you can build up a pension for the future and pay less tax at the same time.
Once you have set up your pension savings and determined the amount you want to contribute each month, it's a good idea to enter this in your tax return as a tax deduction for the contributions.
