With nearly 5 million workers classified as self-employed in the UK, there’s never been more people starting their own business or going freelance. However, a growing fear is that not enough of them have planned sufficiently for retirement.

This is based on research by insurance company Aegon who claim that under half of the UK’s self-employed population don’t have a sufficient pension strategy in place. Even more worryingly, a report by the Federation of Small Businesses suggests 15% do not have retirement savings of any kind.

And with companies such as Uber and Deliveroo increasingly reliant on freelance workers, the problem could elevate over the next few decades. The self-employed should thus start planning for their retirement early, especially as government intervention remains unclear.  

How to Afford Retirement

If you’re self-employed or considering the move, it’s highly recommended you start pension planning as soon as possible. Even if it’s a small amount per week, getting into the habit of putting some aside regularly will soon start to add up.

Perhaps the best way to achieve this is to set up a direct debit, transferring your earnings automatically into a pension scheme or savings account, taking the decision to save out of your hands.

A good bit of advice comes from David Smith, the director of financial planning for Bestinvest. He points out that:

“Someone saving £100 a month for 40 years would put the same amount into their pension fund as someone starting 20 years later and putting £200 a month in…

Assuming 6% investment growth throughout, the person starting at age 25 would build a fund of around £190,000, while the 45-year-old’s fund would grow to around only £90,000.”

In other words, the earlier you begin saving as a self-employed worker, the better your options will be in retirement.

money pens and paperwork

Planning is Key

Smart planning is also part of the process. Although it may seem difficult now, making small alterations to your spending habits can result in long-term gains. Make a list of all your outgoings and evaluate where savings can be made. Could you reduce grocery bills or change energy supplier for a better deal? Are you as tax efficient as possible?

Estimate how much you’ll need in retirement. Consider where you’ll be living and how you’ll pay for the mortgage, bills, food, travel, medicine, etc. As a rough guide, industry experts suggest that between one-half and two-thirds of your final salary is required to maintain your lifestyle once retired.

Further Options

One positive for the self-employed is a better opportunity to work past the typical retirement age of 65 – something not possible in certain professions. If you feel fit and healthy, there’s no reason you can’t carry on and maintain an income later in life.

Another possibility is that the government may include self-employed workers onto the new auto-enrolment scheme. The pensions minister, Richard Harrington, has floated this idea but nothing concrete has been announced as yet.

If you do want to pay into a pension pot, there are various options at your disposal, for example, with a personal pension, stakeholder pension or self-invested personal pension. Advice from a professional accountancy company is recommended at this stage, helping you as a self-employed worker approach retirement with less worry.


If you found this helpful, you may also be interested in What You Need to Know About the Workplace Pension if You’re Self-Employed.

For a chat about your pension possibilities, contact us.