Being your own boss has its perks – independence, flexibility, and control over your earnings – but it also means taking charge of your own financial future.
Unlike traditional employees, the self-employed don’t benefit from auto-enrolment or employer contributions. That makes setting up a private pension one of the most important financial steps you can take.
According to the Institute for Fiscal Studies, only one in five self-employed people earning over £10,000 a year are paying into a pension, leaving many facing a potential shortfall of £250,000 in retirement.
To help bridge that gap, Not Ltd’s financial experts and research firm Fairer Finance have outlined how pensions for the self-employed work — and which options offer the best value and flexibility in 2025.
Self-employed workers can access the same tax benefits as employees through personal pensions. The Government tops up contributions by 20% for basic-rate taxpayers, meaning every £80 you pay in becomes £100.
Higher-rate (40%) and additional-rate (45%) taxpayers can claim further relief via self-assessment, bringing the effective cost of saving down even further.
Even if you’re not earning, you can still contribute up to £2,880 a year, which is then topped up to £3,600 by HMRC, says Romi Savova, CEO of PensionBee.
The annual allowance for 2025–26 is the lower of £60,000 or your total income, beyond which tax relief stops.
There are three main pension types available to self-employed workers, each catering to different needs and investment styles:
Personal Pension
Also called a private pension, this is the most popular option. It’s offered by large pension providers and insurance firms and typically comes with ready-made investment portfolios. You choose a risk level — cautious, balanced, or adventurous — and the provider manages the rest.
Stakeholder Pension
A flexible option with low minimum contributions, capped charges, and the ability to stop or restart payments easily. These plans are ideal if your income varies month-to-month, though investment choice can be more limited.
Self-Invested Personal Pension (SIPP)
Best suited for confident investors who want full control over their investments. A SIPP lets you pick your own stocks, funds, and ETFs, offering maximum flexibility but often higher charges.
Helen Morrissey of Hargreaves Lansdown advises: “If you’re an engaged investor, a SIPP offers the most freedom. If you prefer simplicity, a personal pension with a ready-made portfolio is usually best. Always check fees — some platforms charge for features you may never use.”
The best pension providers for self-employed workers
Best for switching between employment and self-employment:
Nest – The Government-backed Nest pension is ideal for those moving between self-employment and PAYE roles, as contributions from both can stay in one pot. However, its 1.8% contribution charge makes it more expensive for early savers.
Best for flexibility:
Halifax, Bank of Scotland, and Freetrade – All three allow you to open a SIPP with no minimum contribution and top up when income allows. Interactive Investor offers similar flexibility, with the option to pause or vary payments.
Best for low charges:
Vanguard – One of the cheapest, charging just 0.15%, capped at £375 per year.
Interactive Investor – Flat monthly fees from £5.99 to £19.99, depending on plan size, make it excellent for larger portfolios.
Invest Engine and Prosper also offer zero platform fees, appealing to cost-conscious investors.
Best for investment choice:
Interactive Investor, Fidelity, and Hargreaves Lansdown all offer thousands of global funds and shares — ideal for those who want control and variety.
Best for low dealing costs:
Freetrade, Invest Engine, and CMC Invest offer free or ultra-low dealing charges. Interactive Investor charges just £3.99 per trade for UK and US shares.
James Daley, managing director of Fairer Finance, warns: “Fees have an enormous impact on long-term growth. Some ready-made pensions cost under 0.5% a year, while others exceed 2%. Over decades, that difference could wipe tens of thousands off your retirement pot.”
Frequently asked questions
Do self-employed people get the state pension?
Yes. You qualify under the same rules as employees — with 10 years of National Insurance (NI) for a partial pension and 35 years for the full amount. Those earning over £12,570 a year must pay NI contributions, while those earning less may need to make voluntary payments to maintain their record.
Do I have to make regular contributions?
No, you decide when and how much to save. However, consistent investing gives your pension more time to grow.
Do self-employed pensioners pay tax?
Yes, pension income is taxable, though you can stop paying NI from the April after you reach state pension age.
The self-employed have more flexibility than traditional employees — but with that freedom comes responsibility. Whether you opt for a low-cost personal pension, a flexible SIPP, or a simple stakeholder plan, starting early and saving regularly remains the most powerful way to secure a comfortable retirement.
As Morrissey puts it: “The best pension is the one you start today — not the one you plan to open next year.”
