Self-Employed Pensions: Your Options and How to Start

Why it matters

Do self-employed people need a pension?

You do not have to have one, but without one you are likely to rely heavily on the State Pension. Employees are automatically enrolled into a workplace pension and their employer pays in. The self-employed get neither. According to the DWP's Family Resources Survey, 21% of self-employed working-age adults were in a pension in 2024/25, compared with 80% of employees.

The full new State Pension is £241.30 a week in 2026/27, about £12,500 a year. MoneyHelper's view is that, by itself, the State Pension is unlikely to give you enough for a comfortable retirement. Selling the business or a property later can help, but neither is guaranteed, and the money may come later or be less than you hope.

Your options

What pension options are there for the self-employed?

MoneyHelper explains the main types. Nest accepts self-employed members aged 16 to 74 who normally work in the UK. Its charges at October 2026 are an annual charge of 0.3% of your pot plus 1.8% of each contribution, and the minimum payment is £10.

Choosing

What is the best pension for the self-employed?

There is no single best pension. The right one depends on how much you will pay in, how involved you want to be with your investments and how your income comes in. These are the things to compare:

• Charges. A small difference in yearly charges adds up over decades. Look at both the provider's charge and the fund charges.
• Flexibility. Can you pay lump sums, change or pause payments, and pay by card or bank transfer when cash comes in?
• Investment choice. A good ready-made default fund suits many people. A SIPP suits those who want more control.
• Minimum payments. These range from about £10 to much higher amounts.
• Old pensions. If you have pensions from past jobs, a plan that can take transfers may let you combine them, although check first for guarantees or exit charges.

Limits

How much can you pay into a pension if you are self-employed?

You get tax relief on personal contributions up to 100% of your relevant UK earnings in the tax year, which for the self-employed means your taxable trading profits. If you earn less than £3,600, or nothing at all, you can still pay in up to £2,880 a year and, in a scheme that adds relief at source, the provider tops it up to £3,600, according to HMRC.

The annual allowance, the most that can go into your pensions each year before a tax charge applies, is £60,000 in 2026/27, including your contributions, tax relief and any company contributions. It can be lower if your income is very high or if you have already started taking money flexibly from a pension, when the Money Purchase Annual Allowance of £10,000 applies. You can also carry forward unused allowance from the previous three tax years, as long as you were a member of a registered pension scheme in those years. Dividends do not count as relevant earnings.

Tax relief

How does pension tax relief work for the self-employed?

With many personal pensions and Nest, you pay in from your taxed income and the provider claims basic rate relief of 20% from HMRC. So £80 from you becomes £100 in your pension. If you pay higher or additional rate tax, you claim the extra 20% or 25% through your Self Assessment tax return. In Scotland, the provider still adds 20%, and anything above that is also claimed through Self Assessment.

Limited companies

Can your limited company pay into your pension?

Yes. If you are a director of your own limited company, the company can pay into your pension as an employer contribution. It is not taxed as your income, and it is usually an allowable expense for corporation tax. HMRC's Business Income Manual says it looks at your whole pay package, not just the pension contribution, and accepts it where it is comparable with what an unconnected employee would be paid for similar work.

Company contributions are not limited by your salary in the way personal contributions are, but they still count towards your annual allowance. Your accountant can help you work out the right mix of salary, dividends and pension.

Irregular income

What if your income goes up and down?

Many personal pensions let you pay regular amounts, one-off lump sums, or both, and change or pause payments when you need to. Many self-employed people pay a lump sum once their accounts are done and they know their profit for the year. Just remember that relief is limited to that year's taxable profits, and the extra higher rate relief is limited to the amount of that year's income taxed at 40% or 45%.

State Pension

Will you get the State Pension if you are self-employed?

Yes, if you have enough qualifying years on your National Insurance record: at least 10 for any new State Pension and usually 35 for the full amount. If your profits are £7,105 or more in 2026/27, Class 2 contributions are treated as paid, so your record is protected without paying them. Below that, you can choose to pay voluntary Class 2 contributions of £3.65 a week. Check your State Pension forecast to see your record and whether you can fill any gaps.

Alternatives

Is a Lifetime ISA an alternative to a pension?

For some people it can sit alongside one. A Lifetime ISA adds a 25% bonus on up to £4,000 a year, and you can use it for retirement from 60. You must make your first payment before 40, and taking money out for any reason other than a first home, reaching 60 or terminal illness carries a 25% charge. A pension usually gives more for higher rate taxpayers and has much higher limits. The Lifetime ISA is due to be replaced for new savers by a First Time Buyer ISA, although no date has been set.

Getting started

How do you start a pension if you are self-employed?

MoneyHelper has a free guide to pensions for the self-employed if you want to read more before deciding.

Later on

When can you take money from your pension?

Usually from 55, rising to 57 from 6 April 2028. You can normally take up to 25% tax free, up to a lifetime maximum of £268,275, and the rest is taxed as income when you take it. Our guide to how pensions are taxed in retirement explains the options.

Pensions are generally protected if you are made bankrupt, under section 11 of the Welfare Reform and Pensions Act 1999, although in England and Wales a court can order the recovery of contributions that were excessive and unfairly prejudiced your creditors. From 6 April 2027, most unused pension funds will count towards your estate for inheritance tax.

Advice

Should you get advice on a self-employed pension?

Setting up a simple personal pension yourself is straightforward. Advice can be worth it if you are deciding between paying yourself salary, dividends or pension through a company, using carry forward to pay in a large amount, combining old pensions, or working out how much you need to retire on.

Joanne can look at your income, your existing pensions and your plans, and explain your options in plain English. Our guide to how much to put in your pension may also help.

Common questions

Self-employed pension questions, answered

This guide is general information only. It is not personal financial or tax advice and it does not take account of your circumstances. It does not recommend any pension provider. Tax rules and allowances can change, and the tax treatment depends on your circumstances. The value of investments and any income from them can fall as well as rise, and you may get back less than you invested. A pension is a long term investment and you cannot normally take money from it until age 55, rising to 57 from April 2028. The information is correct as at October 2026.

Every Step Financial Services is an Appointed Representative of New Leaf Distribution Ltd, which is authorised and regulated by the Financial Conduct Authority, FRN 460421.