Dean Butler, Managing Director for Retail Direct at Standard Life, part of Phoenix Group comments: “With “a job for life” increasingly seen as a thing of the past, more people are broadening their horizons when it comes to career prospects. While job-hopping between employers is now the norm, we’re also seeing a rise in freelancing, side hustles and full-time self-employment after a pandemic-era lull – whether for flexibility, independence or the chance to turn a passion into a business. For some, the appeal lies in the freedom to work from anywhere – while many employers offer remote working and flexibility, self-employment can enable an extra level of freedom even including the possibility of combining work and travel as a ‘digital nomad’.
“But while self-employment can bring autonomy, it also brings new financial responsibilities. One of the most often overlooked is pension saving – without an employer to set up a pension plan or contribute to your pot, it’s especially important to stay on top of your retirement savings. Worryingly, two thirds (64%) of self-employed people aged between 60 and 65 today have no private pension wealth at all. That’s why it’s vital that pension planning forms a part of your business admin from day one. The Government recently announced the launch of a new Pensions Commission, as it aims to tackle some of the biggest challenges facing UK pension policy - including how to better support groups currently underserved by the system such as the self-employed. In the meantime, the onus is on you to take control of your long-term saving
Dean Butler shares the top things to bear in mind about your pension when becoming self-employed:
Set up a pension plan: “Generally, when you work for someone else, you’ll be automatically enrolled into a workplace pension scheme. This means your employer sets up your pension plan and regularly pays a set amount into your pot with you also contributing automatically from your salary. When you are self-employed, the responsibility is all on you. You will need to set up your own personal pension plan, and all contributions to this plan will come from you. For those who have an existing workplace pension with a previous employer, it is worth looking closely at this to see if the charges you are paying are competitive and that the investment approach aligns with your current needs. If you are happy with both of these factors, it could be worth staying with the scheme and continuing to make your own contributions, but if you think you could be getting better elsewhere, it’s worth looking around.
Reap the pension tax benefits: “While your pension might not seem like an immediate financial priority when you become self-employed, halting contributions can significantly impact your future retirement savings. Therefore, if you’re able, you should prioritise continuing any regular contributions you already have in place.
“It’s also worth noting that pension saving offers short term advantages thanks to tax relief. Typically, you pay income tax on your earnings, but if you contribute that income to your pension instead, the tax you would’ve paid is added to your pension instead. This means basic-rate taxpayers get a 20% boost from the government on their pension payments, so it’ll only cost you £80 to pay £100 into your pension. Higher or additional-rate taxpayers can claim even more, but you’ll need to claim back anything above 20% yourself via a HMRC Self-Assessment tax return form. You can claim back tax relief for the previous four tax years.
“If you’re self-employed, and also the limited company director of your business, paying into your pension through your business account can be even more beneficial as you can use those payments to reduce your tax liability.”
Consider your State Pension: “The State Pension recently increased to £11,973 annually for the 2025/26 tax year and looks set to keep rising into 2026/27. This is certainly a boost for pensioners, but for the majority of people it isn’t enough to achieve even a basic standard of living in retirement. According to the Pensions and Lifetime Savings Association (PLSA), a single person would need £14,400 a year to achieve even a ‘minimum’ lifestyle in retirement, over £2,400 higher than the current State Pension.
“That said, you should prioritise maximising your State Pension income, so you receive as much as possible. The amount you get from the State Pension will depend on how many years’ worth of full National Insurance (NI) contributions you have made. To get the full new State Pension, you’ll need to have made 35 years’ worth of NI contributions. Gaps in your NI contribution record can cause you to lose a big chunk of your retirement income, so it’s important keep up with your contributions. You can an check your NI record online and for those with NI gaps, you danielle.richardson@telegraph.co.ukcan make voluntary contributions to fill in gaps from 2017 onwards
“While those who have always worked for an employer will be used to NI contributions being taken out of their salary automatically, this is not the case when you become self-employed. When you are self-employed you are solely responsible for paying your NI contributions, so it’s especially important to make sure you are keeping up with them. You can make these payments through your yearly self-assessment or by making payments online.”
Keep on top of old pensions: “If you’ve changed jobs a few times before becoming self-employed, you probably have a few workplace pension plans. It’s important that you keep track of where all these are and think about consolidating these pots into one plan. This not only keeps all your pension savings in one place, but it could also potentially reduce fees and admin and provide you with greater clarity when planning for retirement. That said, consolidation isn’t the right solution for everyone - it’s important to consider all the facts before deciding, and ensure that transferring your pensions won’t cause you to miss out on any valuable benefits with your current plans.”
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