Planning for retirement as a self-employed person in the UK

Why retirement planning is critical for the self-employed

Being self-employed gives you freedom and flexibility. However, you won’t be automatically enrolled in a workplace pension. You need to set up your own pension and save for retirement yourself. Without planning, you risk relying solely on the State Pension, which is currently £230.25 per week (2025/26). This equates to around £11,973 annually which is unlikely to be enough to fund a comfortable lifestyle on its own.

Challenges self-employed workers face

When it comes to retirement, self-employed workers face unique hurdles. They don’t have an automatic workplace pension. Their income can be irregular. And they must navigate complex tax rules on their own or with the help of hired professionals. Understanding these challenges is the first step toward building a secure future.

• Lack of knowledge
  Research from our 2026 Get Britain Pension Ready campaign shows a clear gap. Nearly half of employed workers (44%) think there’s enough pension information for their situation. For self-employed workers, it’s only 28%. If you’re self-employed the onus is on you to do the research. You must ensure your pension will meet your needs when you retire.
• Irregular income
  Depending on your area of business your earnings may fluctuate month to month. This can make it harder to commit to fixed pension contributions. So, flexible pension options are often essential. There’s no legal minimum pension contribution for the self-employed. However, some providers set their own minimums. For example, £20-£100 per month or a one off contribution to open the account. It’s worth confirming this before setting up your pension.
• No employer contributions
  Employees often receive matching contributions from their employer. As a self-employed person, you are responsible for funding your pension entirely. So, you may wish to plan for higher personal contributions.
• Complex tax rules
  Understanding annual allowances, carry-forward rules, and tax relief is crucial. Without this knowledge, you could miss out on valuable benefits. For more details, visit gov.uk. You can read the guides on the government site MoneyHelper. Alternatively, speak to your accountant or financial advisor.

Your pension options in the UK

The good news? There are several pension solutions designed for self-employed workers. From simple stakeholder pensions to flexible SIPPs and even government-backed schemes like NEST. You’ve got plenty of options. Each offers different levels of control, cost, and flexibility. Picking the right one depends on your goals and income pattern.

1. Personal and Stakeholder Pensions
These pensions are simple and regulated. You contribute regularly and your money is invested. Stakeholder pensions are particularly useful for self-employed workers because:

• They cap charges keeping costs predictable.
• They offer lower minimum payments. They also allow flexible contributions, so you can pay more in good months and less in lean ones.

2. Self-Invested Personal Pensions (SIPPs)
SIPPs give you control over where your money is invested. You can choose stocks, funds, or even commercial property. They’re ideal if you want hands-on involvement and have some investment knowledge.

3. NEST (National Employment Savings Trust)
NEST is a government-backed pension scheme. It is run as a not-for-profit under the Department for Work and Pensions. This option is designed to be low-cost and accessible. It may be a good starting point if you want simplicity and security.

4. Lifetime ISA (LISA)
A LISA is not a pension, but it could be a useful supplement. You can save up to £4,000 each year until you turn 50. On top of that, you’ll receive a 25% government bonus. These funds can be used for retirement after the age of 60.

Tax relief and allowances

One of the biggest advantages of saving into a pension is the tax relief you receive. However, the rules can be tricky. Annual allowances, carry-forward opportunities, and higher-rate relief can boost your retirement savings. To benefit fully, you need to use them correctly. Knowing how these work and where to get help, can make a big difference.

• Annual allowance
  You can contribute up to £60,000 per year. Or 100% of your earnings, whichever is lower. This includes tax relief.
• Carry forward
  If you didn’t use your full allowance in the past three tax years, you can carry it forward. This is helpful for making larger contributions when income allows.
• Tax relief
  Basic-rate taxpayers get 20% relief automatically. Higher-rate taxpayers can claim additional relief through their tax return. This means every £80 you contribute becomes £100 in your pension.

Self-employed pension FAQs

Q1: What is the best pension for self-employed UK workers?
It depends on your needs. SIPPs offer flexibility and control. Stakeholder pensions and NEST are designed to be simpler and low-cost.

Q2: How much can I contribute to a UK pension?
Up to £60,000 annually. Or 100% of your earnings, whichever is lower. This is subject to income and tax rules.

Q3: Can I rely on the State Pension alone?
Maybe but at £230.25 per week, it’s unlikely to cover all expenses.

Q4: What happens if I stop contributing to my pension for a while?
Most pensions allow you to pause contributions without penalty. However, your retirement pot will grow more slowly. It’s a good idea to resume contributions as soon as possible.

Q5: Can I open more than one pension as self-employed?
Yes. It’s possible to hold several pensions. You can choose to combine them at a later stage to make things simpler.

Q6: What is the minimum I need to start a pension?
Some providers allow you to start with as little as £10 per month, such as NEST. Others may require £25 or more.

Q7: Do I still get tax relief if my income is very low?
Yes, even non-taxpayers can receive basic tax relief. This applies to contributions of up to £2,880 per year. With tax relief, that amount is boosted to £3,600.

Q8: What happens if I exceed the annual allowance?
You’ll face a tax charge on the excess. Track contributions and use carry-forward rules to avoid this.

Q9: Can I access my pension early if I’m self-employed?
Normally, you can access your pension savings from age 55. This will rise to 57 in 2028. Access is available regardless of your employment status.

Q10: Is a Lifetime ISA better than a pension for retirement?
LISAs can complement pensions dependant on your personal circumstances. However, they have lower contribution limits and sizable restrictions. Pensions usually offer better tax advantages for higher earners.

Q11: How do I find a regulated financial adviser?
Use the FCA’s Financial Services Register or take a look at our guide ‘How much does pension advice cost in the UK?’.

Want to find out how ready for retirement you are? Take our self-employed retirement readiness quiz. This will help you identify any knowledge gaps. You’ll also get access to educational resources.