If you’re self-employed, you probably spend your days juggling a long list of tasks and responsibilities. Understandably, taking the time out of your busy work schedule to plan for the future might feel like a luxury you can’t afford.

Research published by PensionAge has revealed that 90% of self-employed workers aged 55 and over don’t have the finances in place for a moderately comfortable retirement. What’s more, 38% have no pension savings at all, rising to 50% of those aged under 35.

Yet, while the day-to-day demands of your business may feel more pressing, failing to build your pension savings could mean that you and your family miss out on the retirement lifestyle you’ve always dreamed about. Without a big enough retirement nest egg, you might end up working for longer than you’d like to.

If you’re self-employed and not currently paying into a pension, read on to discover five practical steps you could take now, to set you on the path towards a comfortable retirement.

1. Set up a pension

This might seem like an obvious step, but it’s an important one.

The full new State Pension for 2024/25 is £221.20 a week, or £11,502.40 a year, for those who are eligible for the full amount (more on this below). Yet, according to the Pensions and Lifetime Savings Association, you need £43,100 a year for a comfortable retirement, or £59,000 as a couple.

As such, it’s likely that you’ll need to draw on multiple sources of private income to achieve the retirement lifestyle you desire.

While you may have other assets and investments to use, a private pension offers a tax-efficient way to build the wealth you need for an enjoyable retirement.

You’ll usually receive government tax relief on each contribution you make up to your Annual Allowance, which is normally £60,000 or 100% of your earnings, whichever is lower (2024/25). This may be lower if your income exceeds certain thresholds, or you have already flexibly accessed your pension.

If you’re a basic-rate taxpayer, you could receive 20% relief, meaning that a £100 contribution only “costs” you £80. If you’re a higher-rate or additional-rate taxpayer, the relief is even more generous –you could claim up to 40% and 45% respectively. You’ll need to claim higher or additional-rate tax relief through self-assessment, whereas basic-rate relief is usually added automatically.

What’s more, the longer your pension funds remain invested, the more potential they have to grow. So, starting a pension could be a valuable part of your retirement saving strategy as a self-employed worker.

2. Track down “lost” pension pots

You might have pension pots from previous periods of employment, or from your self-employed career, that you’ve forgotten about or “lost”.

Indeed, UK employers began automatically enrolling eligible employees into workplace pensions in October 2012, and this is now a legal requirement.

This means that it’s well worth checking that you don’t have existing pension funds that you’re unaware of.

If you think this is unlikely, you might be surprised to learn that, according to the Pensions Policy Institute, there are an estimated 3.3 million lost pension pots containing £31.1 billion worth of assets.

You can track down lost pension pots by rooting out old paperwork, contacting previous employers, or using the government’s free online Pension Tracing Service to find the contact details of your previous pension providers.

While this may take up a little of your time, you might be pleasantly surprised to find that you’re not creating a retirement fund from scratch, but instead building on a foundation of existing pension funds.

3. Consider your retirement goals

While employees are usually enrolled on a scheme selected by their employer, as a self-employed worker, you’ll need to do the leg work yourself.

This means you have the freedom to choose a pension scheme that fits your values, circumstances and needs. Yet, the range of options available might feel overwhelming, and you’ll need to be disciplined about making contributions.

That’s why setting clear and meaningful retirement goals is crucial. Perhaps you’re eager to retire early and spend more time with your grandchildren? Or maybe your priority is to build up a lasting legacy to pass on to your loved ones?

When you choose to retire and how you plan to spend your time are essential considerations that will help you calculate how much you need to accumulate in your pension pot to fund your desired lifestyle.

Armed with this knowledge, you’ll be one step closer to crafting a financial plan that helps you progress towards the retirement you desire. 

4. Check your State Pension entitlement

While the State Pension may not be sufficient to fund your retirement plans on its own, it could be an important part of your income after you leave work behind.

However, you can only claim the new State Pension if you have at least 10 “qualifying years” on your National Insurance (NI) record, and you’ll need at least 35 qualifying years to be eligible for the full amount.

A qualifying year is a tax year in which at least one of the following applies to you:

  • You were employed and paying NI contributions (NICs)
  • You were receiving NI credits because, for example, you were unable to work due to illness
  • You were self-employed and had profits over certain thresholds
  • You were paying voluntary NICs

You can check your NI record on the government website to see if you have any gaps. If you think you might fall short of the required number of qualifying years for receiving the full new State Pension, you might want to consider topping up your record by making voluntary contributions.

For example, if there were several years when your profits fell below the thresholds for making NICs, you could plug these gaps and potentially boost your lifelong income by thousands of pounds.

There is an important deadline approaching for boosting your State Pension entitlement in this way.

Normally, you can only fill gaps in your NI record from the last six years. Yet currently, anyone who reached State Pension Age after 6 April 2016 can top up their record as far back as 2006 – but only until 5 April 2025, when the normal rules will resume. 

With the clock ticking, if you’re self-employed and have an incomplete NI record, now is the time to act.

5. Seek professional financial advice

If you’re self-employed, planning for retirement may be more complicated than it is for employed individuals.

Fortunately, we have years of experience supporting self-employed clients to plan for a healthy, happy retirement.

We can work with you to identify your long-term goals and review your current financial situation. Using our expertise and advanced tools, such as cashflow modelling, we can help you understand your retirement income needs and assess whether you’re on track to meet them.

Together, we can then explore the different pension options available and craft a retirement savings plan tailored to your unique circumstances and life goals.

Get in touch

If you’re self-employed and not currently paying into a pension, we can help you review your finances and put a plan in place to help you work towards your retirement goals.

Please email info@doddwealthcare.co.uk or call 01228 530913 / 01768 864466.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

The Financial Conduct Authority does not regulate cashflow planning, estate planning, or tax planning.

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 Pension Regulator.

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