Why Pensions Matter for the Self Employed

Being self‑employed gives you freedom, flexibility, and control over your work, but it also means taking full responsibility for your own financial future.

Unlike employees, who benefit from automatic workplace pension contributions from their employer, self‑employed individuals don’t receive any built‑in retirement support. Every pound that goes towards retirement must be put there intentionally.

According to the Office of National Statistics, the UK average life expectancy in 2025 was 82 for men and 86 for women. With the average person retiring at age 65, that’s at least 17 – 21 years (possibly more) where you need to make a provision for your own income.

Providing you have paid adequate National Insurance contributions during your working life, you will be entitled to a State Pension. The current state pension age is 66 (which is rising and will increase to 68). If you want to retire before this age and/or want to have more income than just the State Pension, having investments and pensions of your own isn’t just advisable, it’s essential!

Regardless of whether you are a Sole Trader or a Limited Company there are several advantages of paying into a pension:

Do you have staff who work for you or are thinking of taking on staff?

Under the auto‑enrolment rules, it is a legal requirement for all UK employers to enrol eligible staff into a workplace pension and also contribute to it. This duty applies from the day the first employee starts.

An employee must be automatically enrolled if they:

• Are aged 22 to State Pension Age
• Work in the UK
• Earn more than £10,000 per year

The total minimum contributions are 8% of the employee’s qualifying earnings per year split as follows

• Employer: 3%
• Employee: 5% (including tax relief)

Building a pension is a long‑term journey, not a one‑off event. The most effective pensions grow gradually over many years. It is common for individuals to start off with a low amount and increase this over time as they get used to saving and as their earnings increase.

Each contribution into a pension is invested, and those investments grow year after year. Over time, the returns you earn begin to generate their own returns, creating a snowball effect. This compounding is the biggest driver of long‑term pension growth.

A well‑built pension is usually accumulated by:

• Saving regularly, even if earnings fluctuate
• Increasing contributions as income rises
• Taking advantage of tax relief, which boosts what goes into your pot
• Choosing a suitable investment strategy for your age and risk appetite
• Staying invested for decades, allowing growth to build steadily
• Reviewing your plan periodically to ensure you stay on track

Pensions are long-term investments. Your fund may go up or down in value. You may get back less than you have paid in. You cannot normally access your pension before age 55, rising to 57 in 2028.

Tax rules can change and the impact on you will depend on your individual circumstances. The Financial Conduct Authority does not regulate Tax Advice.

This information does not constitute personal advice. Financial Advice is required to determine whether a pension, contribution level or investment strategy is suitable for you.