The self-employed client
Self-employed borrowers with irregular income: the pension, protection and tax gaps the mortgage paperwork shows you, and how the introduction to E&G works.
Self-employed borrowers with irregular income: the pension, protection and tax gaps the mortgage paperwork shows you, and how the introduction to E&G works.
Self-employed applicants include sole traders, contractors, freelancers and people who earn through a mix of all three. Their income does not arrive in the monthly shape a lender expects, so you assemble from other evidence what a payslip would show.
That evidence also shows the wealth needs. A self-employed borrower may have strong income and little saved behind it: no pension, limited protection, and a tax position they manage alone. You see all of it while arranging the mortgage.
A self-employed borrower has no payslip, P60, employer’s contract or predictable monthly figure. To place the mortgage you rebuild all of that from other evidence: two or three years of accounts, SA302s and tax-year overviews, business and personal bank statements, an accountant’s reference. By the time the case is ready you know this client’s finances in detail.
The wealth gaps show in the documents you already hold:
You have already verified each of these facts for the lender.
An employee is enrolled into a pension automatically and contributes without thinking about it. A self-employed person has to set one up themselves, choose to fund it out of income they could otherwise keep, and keep going with no prompt and no employer match. Some never start, and others open a personal pension, pay in for a while and stop after a lean year. The result can be a client in their forties or fifties with a good income, a growing business and little put by for retirement. The bank statements you have already read show whether any pension contribution is being made. How much they should contribute, and in what form, is regulated advice, and it is ours to give.
A self-employed borrower may have less protection in place than an employee. An employed borrower who cannot work often has sick pay to fall back on, and sometimes group income protection. A self-employed borrower usually has neither, and their income stops when they stop working. You will often place life cover to repay the mortgage, because that is tied to the loan and within your permissions. Income protection sits within your permissions too, and for a self-employed client it covers the earnings the household depends on. The introduction to E&G is for what sits beyond the protection: the pension, the investment of any surplus, and the tax and estate planning around them.
A self-employed client manages their own finances. They set money aside for the January bill, decide whether to incorporate, and work out what they can safely draw, usually with an accountant who prepares the return but does not plan the wealth around it. The mortgage brings up questions the accountant may not cover: how the surplus should be invested, and whether a pension could reduce the tax and build the retirement at once. With no employer to arrange any of it, the prompt may come from the broker who arranged their mortgage.
The line is the same as for any client. You can advise on the mortgage and on the protection around it, because life cover, critical illness cover and income protection sit within the permissions your firm already holds. You must not advise on the pension, the investment of the surplus, or the tax and estate planning around them. Telling a self-employed client to open a SIPP, or to move retained cash into an investment, is regulated advice you do not hold the permissions for. You identify the need and introduce the client to us, and we assess it, recommend, implement and carry the responsibility. The regulated advice is given by Equity & General, authorised and regulated by the Financial Conduct Authority (No. 474163).
The introduction is one sentence at the end of a case you were handling anyway. Something close to: “Now the mortgage is sorted, it would help to have someone look at the pension side and what that surplus should be doing. I work with a regulated firm who handle that.” Nothing moves until the client agrees and the consent is recorded. What passes to us is short: the client’s name, their contact details, and what you noticed, in a line or two. We make contact within a week, the first meeting is a fact-find, free of charge, at which products are not discussed, and you are welcome to sit in. The regulated advice, the administration and the compliance are then ours, and you follow the progress in the partner portal.
These cases come up in your ordinary mortgage work:
The introduction gives the client an advice relationship that continues after the mortgage completes.
A self-employed client who takes advice, invests and stays generates recurring income that you share in, and it continues after completion. Because it recurs, that income also builds something a buyer of your firm can value. For self-employed clients you already hold the evidence of the gap, and the introduction takes a sentence and a recorded consent.
No. Recommending that a client open or fund a pension is regulated advice, and it needs permissions your mortgage firm does not hold. Your part is to notice that no pension is being funded, which the bank statements show, and to introduce the client to Equity & General. We give the advice and carry the responsibility for it.
Yes. Income protection sits within your permissions, alongside life cover and critical illness cover. The introduction to us is for the planning beyond protection: the pension, the investment of any surplus, and the tax and estate planning around them.
The question is current while you are arranging the mortgage. When the client is ready, whether that is next month or next year, they know to come back to you, and you make the introduction then.
Only what the client has agreed to: the client’s name, their contact details, and what you noticed, in a line or two. Your mortgage file, your affordability work and the documents you gathered are not passed across as a matter of routine. If we need a figure, we ask the client, and they decide what to share.
The pension, surplus cash, protection and sale-planning gaps you see when arranging a company director's mortgage, and where your permission stops and ours begins.
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Read itYour firm keeps the mortgage and protection advice. Equity & General gives the pension, investment and estate planning advice, and a named partnership manager sets the arrangement up with you.