In the last twelve years I’ve had two staff jobs, totalling three years out of twelve. The rest of the time has been contracting and freelance. One of the main advantages a staff position gives over contracting is that it comes along with a company pension. Here in the UK the company will contribute some, you will contribute some and the government will then add some into the pot. However if you are contracting you get nothing, no pension, no holidays, no sick pay, no bonuses. Out off all the benefits the staff pension is the most significant. You can always take holiday, you just won’t get paid for it, but unless you set up your own pension and pay into it yourself you are (and I am) exposing yourself (myself) to a lot of risk further down the lines.

Just to be clear I am not a financial advisor, you should seek advice from someone who is qualified in pensions in your country, but I urge all those of us who are freelancing and contracting to consider how much we can put aside for pension allowances.

What are the alternatives to pensions?

I’ve heard so many people tell me that having a pension is an inefficient way of saving money and that there are other/better ways to save for a retirement – again just to labour the point I am not a financial adviser, I am collating some of the information that I have learnt along the way to show some alternatives to pensions, consult with a financial adviser.

Property

The estate agent who sold me my house told me with surety that property doubles in value every ten years guaranteed. Of course five years later my property value has decreased by 10% and that estate agency is now out of business. The concept here I want to present is that if you can get one rental property, not just any property but one that will rent out easily then over time that will give you a monthly income. From one property you can expand it to two in eighteen months by releasing the equity in the property.Here is a video that explains how this method could work. I’m certainly aiming to get a rental property over the next year.

ISAs/Funds

In the UK an ISA is a tax free allowance that everyone gets, currently you can save up to £11,520 either in a cash and stock & shares ISA. That is you can either put the whole lot in a stocks and shares ISA or put half in a cash ISA and the other half into a stock and shares ISA. The maximum you can invest into a cash ISA is £5760.A fund is different to stocks and shares in that it is a collection of stocks and shares that can be continually changed. Funds are manged by people called fund managers (makes sense right?) their job is to make sure that your fund is performing well by tracking the market and making decisions that will protect and grow your money. Before investing in a fund, take some time to research the fund manager (not necessarily the individual, researching the company will suffice) and always get financial advice.

Don’t be deceived by the marketing, the marketing team isn’t going manage your fund.

Much like property the idea of investing in either of these is that they will grow over time,

however like property that growth is unpredictable and not guaranteed.

Unlike property while you fund ‘may’ grow it is not guaranteed to return an income. Growing money as a lump sum and gaining a regular income from that amount of money is not the same thing. It’s important to understand what you are looking to gain from putting your money aside, is it a regular income when you retire to maintain your lifestyle or is it a pot of cash? Remember of course that the pot of cash will diminish.

Other practical ways to save and grow money

I found this video really interesting as it explains a lot of different ways to raise and grow money. The narrator goes through eight quite practical different methods to put money aside.

One last time, consult a financial adviser before proceeding. Even seasoned investors have a team of advisers to make sure their money is safe. As always leave comments in the boxes below, tell us what alternatives to pensions you have found, if you do have a pension has it grown and offering the return you expected?