If you’re self-employed, you’ll likely be used to managing your finances independently, including budgeting, dealing with taxes, and reinvesting back into your business.
However, one area that can be easy to overlook is pension planning.
Research from Aviva shows that more than half of self-employed workers aren’t making any pension contributions at all.
While this might seem concerning, it’s not necessarily due to a lack of income or financial awareness. Instead, there are several practical and behavioural reasons why pension saving can fall down the priority list.
With this in mind, continue reading to discover why this happens and how you could start taking steps to address it.
Several factors can make pension saving challenging when you’re self-employed
If you work for yourself, your income might not always be consistent.
Indeed, periods of stronger earnings can be followed by quieter months, making it harder to commit to regular pension contributions.
Simultaneously, the rising cost of living in recent years may have meant you’ve needed to prioritise day-to-day expenses over long-term saving.
You may also simply reinvest any surplus income back into your business. While this is a sensible decision, it can mean you delay pension saving.
It’s also vital to note that, unlike traditional employees, self-employed workers aren’t automatically enrolled into a workplace pension.
Since the introduction of auto-enrolment, millions of UK employees have been building pension savings in the background without needing to actively think about it, as contributions are taken directly from their salaries.
However, as a self-employed worker, this doesn’t exist, and the responsibility to set up and maintain a pension lies entirely with you.
This can quickly lead to a mindset where pension planning is something you intend to address, but never quite get around to.
Failing to build pension savings could significantly affect your long-term plans
If you’re not regularly contributing to a pension, there’s a chance you may need to rely on other sources of income later in life.
This might include the State Pension. Yet, the full new State Pension currently provides just over £11,000 a year, which might not be enough to support your desired lifestyle when you eventually stop working.
You might also plan to rely on your business, either by continuing to generate an income or eventually selling it.
While this can certainly form part of your retirement strategy, nothing is guaranteed.
Demand, market conditions, or personal circumstances could all affect the value of your business or your ability to rely on it for income.
As such, without a dedicated pension, you could find yourself needing to:
- Work for longer than you initially planned
- Adjust your lifestyle in retirement
- Rely more heavily on other assets or savings.
This could lead to uncertainty about your financial security later in life.
You may have also overlooked the benefits of tax relief
Even if you understand that saving into a pension is important, you might not have fully realised how tax-efficient it can be.
This is because pension contributions can benefit from tax relief, which is essentially when the government “tops up” your pot.
As of 2026/27, the Annual Allowance means you can benefit from tax relief on contributions up to £60,000, or 100% of your earnings, whichever is lower.
Tax relief means that a £100 contribution would only “cost” a basic-rate taxpayer £80. Meanwhile, it would only cost higher- or additional-rate taxpayers £60 or £55, respectively.
This additional boost to your contributions can significantly bolster the long-term value of your retirement fund, potentially helping you sustain your desired lifestyle for longer in retirement.
Despite this, research from FTAdviser found that 74% of self-employed workers were unaware that their pension contributions received tax relief.
This shows just how many self-employed workers could be missing out on the opportunity to grow their retirement savings more efficiently.
There are practical ways to start building your pension fund
While pension saving can feel challenging when you’re self-employed, there are several ways you could make it more manageable. Here are three.
1. Start small and build consistency
If committing to large contributions feels unrealistic, you might want to consider starting with smaller amounts.
Even modest, regular contributions can build up over time, especially when combined with potential investment growth and tax relief.
And this approach may even help you establish a healthy saving habit without placing too much strain on your cash flow.
2. Treat pension saving as a priority
It can be easy to fall into the mindset that pension contributions are something you should only do if you have enough money left over.
However, it might be prudent to take a “pay your future self first” approach to your saving efforts.
This involves contributing to your fund as soon as you receive an income, rather than at the end of the month.
When you treat pension contributions in the same way as other essential outgoings, you may find it easier to stay consistent while ensuring you still work towards your long-term goals.
3. Consider taking professional financial advice
As a self-employed person, your income, tax position, and long-term goals may be more complex than those of someone in traditional employment.
So, rather than trying to deal with them yourself, you might find it beneficial to work closely with a financial adviser.
We could help you:
- Calculate how much you may need to retire comfortably, based on your desired lifestyle
- Ensure you’re making full use of pension tax relief and other allowances
- Track your progress over time and adjust your plan if your circumstances or goals change.
Instead of putting decisions off, we could help you put a bespoke plan in place to keep you confident and consistent in your retirement savings efforts.
Get in touch
To find out more about how we can support you, please get in touch by emailing hello@fingerprintfp.co.uk or calling 03452 100 100.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pensions Regulator.