A guide to personal pension plans for the self employed.

Now that we all know a Government pension won't fund a comfortable retirement, it's becoming more important that people provide financially for themselves when they finish work.

But shopping for a decent pension plan once you've become self employed or contract, can seem like a daunting task if you've been used to the relative safety and comfort of a company pension scheme.

The choice can be overwhelming - what type of plan can you start? And what happens with your existing pension benefits? Read our guide to getting your started on the right track.

Benefits of your own pension plan

The good news about a personal pension plan over a company one is that benefits include:

• Income tax relief on the contributions paid, which you don't get with a company scheme.

• Benefits can be drawn from the age of 50, if needed.

• Additional benefits such as Life Cover and Waiver of Contribution (vital to the self-employed in case of long term sickness or accident which would prevent contributions from being paid) can be included, offering further tax relief.

• You decide how your money is invested. Insurance-based funds are sufficient for many people. But for those who like to choose, other investments can include unit trusts and commercial property, as well as investments abroad.

What to consider

Shopping for a pension can be like stumbling through a maze. But there are some things to consider, the main one being of course, which one of the many providers do you choose? To help with the decision making process consider the following:

"The good news is that a personal pension plan has a number benefits over a company scheme, including tax relief."

• Establishment costs and on-going charges - compare them to the rest of the market. These are what you're charged for setting up and administering the pension and will come out of the first several month's contributions. The most efficient way to compare charges is to ask an independent financial adviser to gather the information, or ask the company direct. Amounts vary greatly from one company to the next.

• Investment performance of the company funds - are they consistent on a year-on-year basis? To learn more about a company's performance you could buy Money Marketing magazine which has tables showing performance details of all the different pension funds over a number of years.

• Overall flexibility of the contract. For example, will there be a penalty to retire early? And can you move your money around within the plan, to maximise certain successful investment programmes?

• Can you stop and start contributions? If so will the pension provider penalise you? This is of particular importance to someone who's working freelance or contract.

• Will you be able to transfer your pension funds from your old company scheme, without incurring a transfer fee?

Act now!

The end of this tax year is an excellent time to utilise any unused tax relief by paying a lump sum into your pension scheme for any years you haven't contributed to your pension. As a self employed person this is based on net earnings.