ACCA Taxation (F6) Practice Exam

What type of pension scheme can self-employed individuals participate in?

1. Occupational pension scheme

2. Personal pension scheme

3. Government pension scheme

4. Retirement investment fund

The correct answer is: Personal pension scheme

Self-employed individuals typically participate in a personal pension scheme, which is specifically designed for people without an employer to provide them with a pension plan. Personal pension schemes allow self-employed individuals to save for retirement by making their own contributions, and they offer various tax advantages, including relief on contributions. These schemes are flexible, allowing self-employed persons to choose how much and how often they contribute, depending on their financial circumstances. Unlike occupational pension schemes, which are established by an employer for their employees, personal pension schemes are independent and tailored for individuals managing their own businesses or working as freelancers. While government pension schemes, like the state pension, provide a basic level of retirement income, they are not specific to self-employed individuals, as they are available to anyone who meets certain criteria regardless of employment status. Retirement investment funds could also be utilized by self-employed individuals, but these are not specifically classified as pension schemes, nor do they carry the same tax advantages as personal pension schemes. Hence, personal pension schemes are the most suitable option for self-employed individuals looking to save for retirement.