The self-employed pension problem — and how to solve it
Self-employed workers get no employer pension contribution, no auto-enrolment, and — if they're not careful — no pension at all. It's one of the most significant financial risks facing the UK's five million self-employed people. But the tools available are actually very good if you use them deliberately.
Why self-employment makes pensions harder
Employed people get auto-enrolled and receive employer contributions — effectively a pay rise going directly into their pension. Self-employed people get neither. They have to choose to contribute, choose where, and fund it entirely themselves. When income is irregular, the temptation is always to defer pension saving until 'things settle down' — and things rarely fully settle down.
The options: SIPP, LISA, or ISA?
SIPP (Self-Invested Personal Pension) — the main vehicle for self-employed pensions. Contributions get tax relief at your marginal rate: put in £800 and HMRC adds £200 (basic rate). Higher earners claim additional relief via self-assessment. The annual allowance is £60,000 or 100% of earnings, whichever is lower. Accessible from age 57 (rising from 55 in 2028).
Lifetime ISA — for self-employed people under 40, a LISA can supplement pension saving for retirement (withdrawable tax-free from age 60). The 25% government bonus effectively matches what an employer might contribute. The covers the rules in full.
ISA — no upfront tax relief, but completely flexible — no minimum access age, no drawdown rules. For a self-employed person with uncertain income or early retirement plans, the ISA bridge pot matters.
The self-assessment connection
If you file a self-assessment tax return, pension contributions above basic rate are claimed there. A higher rate taxpayer contributing £10,000 to a SIPP in a year with £60,000 profit claims an extra £2,000 via self-assessment. Many self-employed people miss this claim entirely.
A practical approach for irregular income
Set a percentage of profits as your pension contribution rather than a fixed amount. If you earn £40,000 in a good year, contribute 15% (£6,000). If you earn £20,000, contribute 15% (£3,000). The percentage stays consistent even when income fluctuates. Some providers offer variable direct debit amounts for exactly this reason.
The models self-employed contributions — and the shows your NI position.