Pensions for the self-employed

Lauren Morton | 10/01/2019


Only one in four self-employed people are currently saving for retirement, leaving millions potentially at risk of not having enough cash to fund later life. It’s not hard to see why so many people who work for themselves push retirement planning to the bottom of the priority list.

After all, auto-enrolment, the government scheme which says employers must by law automatically enrol their employees into a workplace pension, doesn’t apply if you’re self-employed, and you won’t benefit from employer contributions either.

But saving for the future is crucial if you want to enjoy a financially secure retirement.

Here, we look at what’s being done to encourage the self-employed to plan for retirement, and how to get started if you’re not currently paying into a pension.

Promoting retirement savings amongst the self-employed

The government in December announced plans to explore new ways to encourage retirement saving among Britain’s 4.8m self-employed population.

The trials it is looking at include:

• Encouraging employees who become self-employed to keep making regular contributions to a pension or other long-term savings product • Using financial technology to help the self-employed overcome barriers to saving • Communicating about the benefits of saving for retirement to the self-employed, for example, via online accounting systems

Source: But you don’t have to wait for the government to provide more information on the benefits of saving for the future. If you’re self-employed and don’t currently save for retirement, here are some of the pension options available to you.

Personal pensions

If you’re self-employed, you won’t have access to a company pension scheme, but you can still pay into a personal pension. Like most company schemes, personal pensions are defined contribution, or money purchase, pension schemes.

That means the amount of income you’ll receive from your pension at retirement will depend on how much you’ve put into it and how the money invested performs over time, once charges are taken into account.

There are plenty of pension providers to choose from, many of which offer a wide a range of investments. If you’re not sure which pension to pick, or which investments to put your money into, seek professional financial advice.

Stakeholder pension

Stakeholder pensions are a type of personal pension which allows you to make low minimum contributions and have caps on the charges that apply to them.

Compared to other plans they may provide a limited range of investment options, and like other types of defined contribution pensions, the amount you’ll end up with at retirement, will depend on how much you’ve contributions and how your investments have performed.

Self-Invested Personal Pensions (SIPPs)

Another option for the self-employed is a self-invested personal pension (SIPP) which, as the name suggests, enables you to pick which investments you want to hold in your pension wrapper and manage them yourself.

This type of pension typically offers you access to a wider choice of investments than other types of pension. However, SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you then a SIPP might not be right.

SIPP holders should regularly review their SIPP portfolio, or seek professional advice, to ensure that the underlying investments remain in line with their pension objectives.


Whichever type of pension you choose, the value of the investments your money goes into can fluctuate, so you could get back less than you put in.

If self-employed via a Limited company, you may wish to consult an accountant for the various options available to you for making pension contributions.

Bear in mind too that you won’t be able to access your pension savings until you reach the age of 55, rising to 57 by the year 2028.

Capital at risk. This article does not constitute personal advice. If you are in doubt as to the suitability of an investment, please contact one of our advisers. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change.

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