The issue many workers face with retirement is not just distant—it already looms as a real worry. Teihgan Cheyne, a 29-year-old nail technician from Glasgow who has run her own business for nine years, falls into this category. She’s busier than ever, yet she hasn’t put anything aside for a pension, instead prioritizing a house deposit with every available pound.
This pattern isn’t rare among the self-employed. Fidelity International’s research shows that self-employed individuals typically need about four extra years of work to accumulate a sufficient pension pot.
Beyond savings, growing tax bills are on the horizon for some. The chancellor recently announced a two-percentage-point rise in tax on income from property or dividends, a change that affects buy-to-let landlords and entrepreneurs operating as limited companies. Yet, this shift can be reframed as a reason to save into a pension: it becomes a more tax-efficient way to secure retirement income.
Marianna Hunt of Fidelity International explains that there are clear advantages for those who run a limited company. By contributing to a workplace pension for themselves, directors can lower their company’s taxable profits and its corporation tax liability. This method allows money to move out of the business and into personal savings without relying on dividends—which will face higher taxes from 2026 onward.
A growing retirement wealth gap exists. Among 45- to 54-year-olds, the average employee has about £70,800 saved in a pension, while self-employed individuals average roughly £3,300. By age 65, the typical employee might have around £235,000 in pension savings, whereas the self-employed average sits near £75,000.
Cheyne began pursuing a self-invested personal pension (Sipp) but stalled during the verification process. “The whole thing feels overwhelming whenever I think about it,” she says. “Sometimes I question whether being self-employed is worth it.”
Abbey Booth, a 49-year-old personal stylist from Hertfordshire, has saved £30,000 in a Sipp with St James’s Place. She’s better off than many self-employed peers but still far from what a salaried person her age might accumulate.
“I expect I’ll be working for a long time, and I do love my job,” Booth notes. “But ageing means adapting—heavy clothing and standing for long periods will take a toll.” She adds that retirement often feels out of reach, and saving has become a higher priority in the last several years. Still, she emphasizes that small steps can add up: start with modest goals and recognize that consistent saving is achievable.
Over the past decade, the share of self-employed workers contributing to a pension has declined from about 30% to 20%. Hunt points out that while Britain’s entrepreneurs form the economic backbone, many miss out on substantial government support for retirement, effectively leaving billions on the table.
That “free money” includes pension tax relief, which boosts pension contributions. For instance, a basic-rate taxpayer who puts £100 into a pension may see the government top it up to £125. Higher-rate taxpayers can receive even more relief.
What practical steps help
Fidelity’s analysis shows self-employed individuals claimed around £1 billion of the £49.8 billion available in income tax relief for pension contributions. Unlike employees, the self-employed don’t have auto-enrolment nudging them to save, and irregular income can complicate commitment—but the potential impact is substantial.
Some pension plans use “relief at source” to automatically apply tax relief. Those paying higher or additional-rate income tax must typically claim the relief through a self-assessment return, with higher-rate allowances delivering 40% relief and additional-rate allowances delivering 45%.
Helpful resources and examples include guides on the best Sipps for 2025 and explanations of why they can be advantageous.
Scottish Widows’ data show that self-employed women often save more for a rainy day than their employed counterparts, even when average income is lower. Yet that doesn’t always translate into pension-specific savings.
Claire Bartlett, 41, who runs an accounting business and coaches others, became self-employed seeking more control. She’s begun contributing through auto-enrolment and has roughly £10,000 in her pension—though she’s still hoping to expand her plans, such as using property investments to supplement retirement income.
Fred Hicks of IPSE notes that retirement can feel distant when focused on running a business. Still, practical steps can help build a pension early: opening a Sipp that automatically benefits from 20% tax relief, and carrying forward unused pension allowances from previous years for up to three years.
In short, while retirement may seem far off for many self-employed people, small, consistent actions can accumulate meaningful savings—and the sooner, the better. The question remains: should self-employed workers treat retirement as a priority now, or risk facing a tighter financial future later? Share your thoughts on when and how to start building a pension as a self-employed professional.
