Being self-employed in the UK is no joke. You signed up for a life of constantly juggling clients, chasing payments, sorting invoices, and meeting deadlines while trying to grow your business.
But while you get locked into that daily hustle, you forget crucial things like your pension. Why? Because, unlike employees, you don’t get employer pension contributions handed to you on a plate. And if you don’t set something up yourself, nothing gets saved. Strangely, this situation isn’t necessarily a bad one.
Building your pension plan gives you more control and flexibility than any standard workplace scheme. So let’s break down how to start saving for retirement as a self-employed person in the UK, and make it work for your situation.
The Self-Employment Pension Gap
If you’re self-employed, run your own business, or freelance full-time, you already know that the hustle is on a level of its own. You’re building something on your terms (which is brilliant), but that freedom comes with some significant trade-offs. One of the biggest is having zero built-in pension plan.
Think about it: regular employees get auto-enrolment without lifting a finger. They most likely have an HR department sorting them out, and employer contributions are padding their pot every month. Meanwhile, you’re dealing with irregular income and unpredictable cash flow and trying to make sense of pension options that seem designed to confuse you.
Here’s a stat that’ll make you wince: less than 20% of self-employed people in the UK are actively saving into a pension, compared to over 80% of employees. That’s not just a gap (that’s a great chasm).
And it’s only getting wider with the current state of the economy. However, no matter how behind you think you are, you can catch up and even get ahead. The trick is starting with something that works for your situation and building from there.
Why Starting Now Actually Makes Sense (Even If You Feel Behind)?
Right now, you’re probably thinking of one of these things: “I barely have enough to cover this month’s expenses,” or “My income changes every month, how can I commit to regular payments?” or the classic “I’m already in my 40s, what’s the point?”.
Any of those points are valid to a certain degree, but waiting for the “perfect time” is precisely how you end up at 65 with nothing but the State Pension (which isn’t realistically going to fund the retirement you want). And the fact is, any time is better than no time. Even if you can only put away £50 a month right now, that’s £50 more than you had before.
Plus, every pound you put into a pension gets an immediate boost from tax relief. So that £50 becomes £62.50 straight away if you’re a basic rate taxpayer. That’s a 25% return before your money even gets invested. You must realise that you’re not signing up for a mortgage here; you’re building a habit that will grow with your business.
How to Save Up for Pension When You’re Self-Employed?
So, you’ve accepted that you must start, but where exactly do you begin? Well, you have a few solid options, and the best one depends on how much control you want and how your business is set up.
But you have to start by doing these two things:
- First, set a rough target. Think about how much you’ll need and when you want to retire. It doesn’t have to be exact, but it gives you something to aim for.
- Don’t stress about starting big. Consistency beats everything. Small, regular contributions will always trump waiting for “the perfect moment” or trying to catch up with massive lump sums later.
So, here are your main options:
1. SSAS (Small Self-Administered Schemes)
Let’s start with an option many self-employed people have never heard of, but it could be a game-changer if you operate through a limited company. Generally, these schemes unlock a completely different level of control and flexibility over your pension fund, which is why SSAS pensions are becoming increasingly popular among business owners.
We’re talking about the ability to invest in commercial property, loan money back to your own company, and even combine your pension with business partners or family members.
You can contribute up to 100% of your salary (capped at £60,000 annually), and it comes with the same tax benefits as other registered pension schemes, but with investment opportunities that most people won’t believe exist in the context of pension investments.
2. SIPPs (Self-Invested Personal Pensions)
You might already know this scheme, but if you don’t, consider these to be typical personal pensions with significantly more investment options. With a SIPP, you can choose from thousands of investments, including individual stocks, bonds, investment trusts, Exchange-Traded Funds, and commercial property.
The downside is that you’re managing your investment portfolio, meaning you need to either know what you’re doing or pay for advice. The annual charges vary wildly depending on how active you are, but expect to pay anywhere from 0.25% to 1% annually, plus dealing charges for trades.
3. Personal Pensions & Stakeholder Pensions
These are essentially the “set it and forget it” options. Insurance companies and investment firms offer personal pensions. You pick a provider from their limited fund selection (usually 20-50 options), and they handle the rest.
Stakeholder pensions are similar but have capped fees (maximum 1.5% annually for the first 10 years, then 1% after that). Both offer basic rate tax relief automatically, and you can increase contributions to higher rate relief through Self-Assessment. They’re perfect if you want something simple and don’t mind giving up control for convenience.
Your Future Self Will Thank You
When juggling invoices and chasing clients, thinking about retirement feels like a luxury you can’t afford. But the reality is that every month you put this off is a month your future self loses out.
You have more control over your pension as a self-employed person than most employees ever will, so use it. Start small, stay consistent, and let compound growth do the heavy lifting.
