Best Pensions For Self-Employed People

Read on to explore the different types of pensions available to self-employed people.

Updated: November 22, 2023
Matt Crabtree

Written By

Matt Crabtree


So, you've decided to take the big step of becoming self-employed. Congratulations! This is an exciting time and a great opportunity to kick your career up a notch.

But as well as celebrating your newfound independence and freedom, you need to think about your financial wellbeing, and setting up a pension is a great first step.

In this article, we’ll explore the different types of pensions available to self-employed people and provide you with an in-depth look into each one, so you can make an informed decision about which is right for you.

What Are Self-Employed Pensions?

Pensions are instrumental for ensuring you have sufficient savings for your retirement. As a self-employed person, it's up to you to figure out how pensions work, establish one, and keep up with your pension contributions.

So, what are they? It is a savings plan that you manage and fund yourself, meaning that you are in charge of when and how much you save. Depending on the type you choose, your pension may invest your money in stocks and shares, bonds, or cash, and these investments will generate a return over time.

Now, you may be wondering whether these are the right choice for you. However, the answer is that it really depends on your individual circumstances and lifestyle. Generally speaking, self-employed pensions are a great way of saving for retirement, as you can tailor your contributions to suit your own budget and timeline.

It’s also worth remembering that the government will top up your contributions with tax relief.

When it comes to setting up a pension, the responsibility lies with you rather than your employer. In most cases, you’ll need to do some research and decide on the type of plan that best suits your individual needs.

You may also want to consider different pension providers and look into the charges they apply. Remember that the cost and features of each plan vary, so it’s important to find the best option for you.

Once you’ve set up your pension, you’ll need to ensure you make regular contributions which you can do via direct debit, or if you prefer, you can manually transfer money from your bank account. Naturally, it’s crucial to ensure your pension savings are enough to give yourself a comfortable retirement income.

Types Of Self-Employed Pension

Here we'll be discussing Self Invested Personal Pensions, National Employment Savings Trust, and private pensions, all with their unique benefits and features worth considering.

So, whether you're a freelancer, sole trader, or running your own business, let's get started on finding the perfect pension plan for you!

Self Invested Personal Pension (SIPP)

SIPPs are a type of pension available in the UK that give you the ability to choose how and where your money is invested.

These are fairly unique compared to other pensions as they allow you to make your own investment decisions and manage your pension funds directly, rather than relying on a third party to manage them on your behalf.


SIPPs are an excellent way to save for your retirement, since you can access the same tax-advantages that other pension funds offer, but also make investments of your own. This puts you in control of where your money is going and what you can do with it.

With a SIPP, you can decide to invest in a range of different assets, such as stocks, bonds, property, and cash, meaning you have the potential to achieve greater returns than with a traditional pension scheme.

Managing Risks

It’s important to remember that like any type of investing, there is a certain amount of risk involved with SIPP investments.

The level of risk will depend on the types of investments you choose and the amount of money you are investing, but as a rule of thumb, it’s vital to research the risks and rewards before making any decisions.

If you’re interested in setting up a SIPP, it's encouraged you have a chat with an authorised financial advisor to discuss the benefits and drawbacks with you in detail and recommend the best option for your circumstances.

It’s also a good idea to compare different providers, since fees and other features may vary from one pension provider to another.

Private/Personal Pension

The UK has a long history of providing public pensions for its citizens, but in recent years more and more people have turned to private pensions to secure a more prosperous retirement.

These are a form of long-term savings that let you enjoy a steady income after retirement, without reliance on a state pension plan.

How Do They Work?

Personal pensions let you make contributions over time into a designated retirement savings plan. And of course, it's always a nice reminder that your contributions could be subject to various tax reliefs and allowances depending on which pension you choose.

Once you have started to contribute to your pension, your money will be invested in a range of assets such as stocks and shares, bonds, property and cash.

Over time, the value of your pension will reflect the performance of the underlying investments. When you're ready to retire, you can take your pension as a lump sum, or you can use it to purchase an annuity which gives you an annual allowance until the end of your life.

Are There Any Disadvantages to Private Pensions?

The main disadvantage of private pensions is that they involve a degree of risk. If markets perform poorly and your investments don’t grow as you’d hoped, you could end up with less money in retirement than you’d planned.

Finally, many self-employed people find investing in a private pension to be quite complicated. Private pensions come with an array of complex rules, so you may find yourself spending a lot of time understanding the ins and outs.

How Do I Choose the Right Private Pension?

Because choosing the right private pension can be a tricky process, it's vital to have a full understanding of the options in front of you. Consider your short and long-term goals, how much risk you’re willing to take, and also chat with a pensions specialist. These can be useful in helping you find the right plan for your specific retirement goals.

National Employment Savings Trust (NEST)

NESTs are a UK-based workplace pension scheme providing an affordable, straightforward way to save for the future.

Similarly to the other options previously mentioned, these pensions provide self-employed individuals with various investment options and peace of mind knowing they're taking steps towards financial security.

Eligibility and Enrolment

To join, you must meet certain criteria. This includes having a UK bank account, being over 16 and under 75, and having earnings liable for Class 2 National Insurance contributions.

Ensure you check your eligibility, then simply enrol by creating an account on NEST's website. Don't forget to choose monthly contributions and select investment options aligned with your goals and risk tolerance.

Investment Options

NEST offers investment options including ethical and sustainable. Choose the best fit, knowing you have the flexibility to make changes as needs and goals evolve. NEST provides online guides, one-on-one support, to make informed decisions about your pension.

Take Control

Join NEST, take control of your financial future. A simple enrolment process, flexible investment options, and support resources make NEST the ideal solution for self-employed individuals who want to maximise retirement savings. Start your journey today.

Which Pension Is Best For Self-Employed People?

The answer to this question really depends on the individual’s own circumstances. Generally speaking, however, the best pension choice for self-employed people is likely to be a personal pension.

This is because they have more control over the contributions they make towards the pension pot, how the money is invested, and when they can access their investments.

As a broader metric, a good personal pension should come with low charges and fees, suitable investments, and flexible access options. It is also important to look out for the type of tax relief offered, since the option available to the self-employed is different to the one available to employees.

What Else Should Self-Employed People Consider?

It is important that self-employed people bear in mind that their pension income may need to last them for many years in retirement. As such, it is best to diversify investments as much as possible and ensure that these investments are regularly reviewed to ensure they are still suitable and up-to-date.

Additionally, it's vital to bear in mind that, when the time comes to take income from a pension, you'll have to pay income tax on the money they receive from their pension pot. It is therefore a good idea to make sure you can afford to pay the tax due and have adequate provision for how you're going to pay it.

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