Self-employed and not paying into a pension? 5 important steps to take now

If you’re self-employed, most of your time is probably focused on acquiring new clients or customers, delivering excellent service, and growing your income.

As a result, saving for your retirement might be the last thing on your mind.

Indeed, according to survey results published by PensionsAge, 76% of the self-employed workers who responded are paying nothing into a pension, and 38% do not have a pension at all.

While your focus may be on short-term finances, failing to save for your financial future could mean that you’re unable to retire as early as you’d like to, or that your retirement lifestyle falls short of your expectations.

So, if you’re self-employed and not currently paying into a pension, read on to learn five important steps to take right now to help you accumulate the wealth you need for the retirement of your dreams.

1. Start a pension

While it’s best to start contributing to a pension as early as you can, it’s never too late to begin saving for your retirement. Building a solid savings cushion for your golden years could provide valuable peace of mind, whatever age you are.

So, if you’re self-employed and not currently paying into a pension, it’s worth exploring your options.

Unlike employees who are usually enrolled on a scheme provided by their employer, you’ll have the freedom to choose a pension that aligns with your specific circumstances and needs.

What’s more, you don’t need access to large sums of money to open a pension. For example, you could start a self-invested personal pension (SIPP) from as little as £20 a month. This may sound like a modest investment, but HMRC will also usually add tax relief to each payment you make – the amount of this contribution will depend on your marginal rate of Income Tax.

However, it’s important to align your pension scheme and your level of contributions to your retirement goals.

With so many options to choose from, this may feel overwhelming. So, you might benefit from speaking to a financial planner who can help incorporate regular pension payments into your long-term financial plan.

2. Trace lost pensions from previous periods of employment

If you were ever employed before you started working for yourself, and moved between different employers, there’s a good chance you have one or more pension pots, even if you’re not aware of them. You may have even started a pension during your self-employed career but forgotten about it over time or lost the details.

Research published by Aviva reveals that there are 2.8 million “lost” pension pots in the UK with an average of £10,000 sitting in them.

So, if you’re not currently paying into a pension and you’re eager to start building your retirement savings, tracking down your existing pensions could be a sensible place to start.

If you have no idea where to find the paperwork for your previous pensions, don’t panic.

Try contacting your old workplaces to see if they can provide the details of any pension schemes you belonged to during your employment with them.

Alternatively, you could use the government’s free online Pension Tracing Service to find the contact details of your previous employers and pension providers.

You might find that you’re not building a retirement fund from scratch, but instead building on existing pension funds.

Read more: 3 practical tips for finding old pensions and boosting your wealth

3. Think about what you want from your retirement

Once you know how much you might already have in your pension pot, and you’ve begun to explore your pension options, it’s time to think about what you want from retirement.

Perhaps you see your retirement as an opportunity to fulfil long-held dreams such as travelling extensively or buying a second home. Or, maybe, after a busy working life in self-employment, you can’t wait to kick back, relax, and spend time with your grandchildren.

Whatever your aspirations, being clear on what you want from your retirement is crucial for setting meaningful savings goals and creating a realistic plan for achieving them.

It’s also important to consider when you want to retire as this is likely to affect how much you need in your pension pot. For example, if you retire at 55 and live until you’re 90, you’ll need to fund 45 retirement years, compared to just 25 if you retire at 65 and live just as long.

However, it can be difficult to calculate how much is “enough” to fund your desired retirement.

So, you might benefit from working with a financial planner who can use cashflow modelling to provide a clear picture of your retirement income needs. This could help you understand how much you need to build in your pension pot between now and your planned retirement age.

4. Check your State Pension entitlement

Alongside your private pension savings, it’s also worth thinking about the value of the State Pension.

In 2024/25, the full new State Pension is £221.20 a week. However, the amount you’ll receive is based entirely on your National Insurance (NI) record.

You can only claim the new State Pension if you have enough “qualifying” years on your NI record. 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 unemployed or a carer
• You were self-employed and had profits over certain thresholds
• You were paying voluntary NICs.

You’ll usually need at least 10 qualifying years to receive any State Pension and at least 35 qualifying years to be eligible for the full State Pension.

So, if you have any gaps in your NI record, you might want to consider boosting your State Pension by making voluntary contributions. Self-employed individuals may well have gaps if profits were lower in certain years.

Filling gaps could potentially add thousands of pounds to your pension pot – and now is the time to act.

Normally, you can only fill gaps in your NI record from the last six years. Yet currently, anyone reaching State Pension Age after 6 April 2016 temporarily has the opportunity to plug gaps in their NI record as far back as 2006. The normal rules will resume after 5 April 2025.

You can check your NI record on the government website to see if you have any gaps. Making voluntary contributions to fill these gaps could be a useful way to boost your retirement income.

5. Speak to a financial planner

If you’re self-employed, saving into a pension may be less straightforward than for employed people who are usually automatically enrolled in a scheme by their workplace.

The choice of pension schemes available could feel overwhelming, not to mention the challenge of staying up to date with changing pension rules.

What’s more, working out how much you need to save for the retirement you dream of can be complicated.

So, seeking professional financial advice could be extremely beneficial.

A financial planner can help you:

• Identify your retirement goals
• Understand your retirement income needs using cashflow modelling
• Determine if you’re on track to achieve your goals
• Explore the different pension options available
• Create a retirement savings plan tailored to your unique circumstances and aspirations.

So, if you’re self-employed and feeling uncertain about your retirement savings, we can help. As an award-winning team of financial planners in Bristol, we can work with you to create a financial plan that aligns with your individual retirement goals.

Please get in touch either by email at helpme@aspirellp.co.uk or by calling 0117 9303510.

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.

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.