The self-employed nail technician Teihgan Cheyne tries not to think about retirement. The 29-year-old from Glasgow has been working for herself for nine years, and is “busier than ever”, but she hasn’t set anything aside in her pension. “I am trying to save for a house, and every penny goes to that,” she said.
This is not unusual for self-employed workers. The wealth manager Fidelity International found that the self-employed have to work for four more years on average to ensure they have enough in their pension pot.
Some self-employed workers will be hit by bigger tax bills too — the chancellor announced a two percentage point increase in tax rates for income received from property or dividends in her budget last month. This will affect buy-to-let landlords and entrepreneurs operating as a limited company.
Marianna Hunt from Fidelity International said that this “only makes it more beneficial to save into a pension”.
“If you’re a limited company director, you can pay into a workplace pension for yourself. By doing so you’ll reduce your company’s taxable profits and your corporation tax liability. It’s an efficient way of taking the money out of the business and putting it into your own pocket without having to take it via dividends, which, as of 2026, will face increased tax.”
A retirement wealth gap
The average employee aged between 45 and 54 has £70,800 in pension savings, compared with £3,300 for their self-employed counterparts. By the time they turned 65 the employee’s pot would be worth £235,000 and the entrepreneur’s pot would be £75,000.
Cheyne started to open a self-invested personal pension (Sipp), but got stuck at the verification process. “I feel overwhelmed every time I think about it,” she said. “I do question if being self-employed is worth it.”
Abbey Booth from Hertfordshire works as a personal stylist. The 49-year-old has £30,000 saved in a Sipp with the investment firm St James’s Place. She is in a better position than many self-employed workers but has less than half what an employee of the same age might have saved.
Abbey Booth
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“Looks like I will be working a good while longer — but luckily I love what I do,” she said. “But I will need to adapt as I get older as clothes are heavy and I’m on my feet a lot.
“It does feel a bit like you will never get to retire,” Booth added. “Saving for a pension has become a bit more of a priority in the last seven or eight years, it’s just really difficult. But it does all add up — it is about starting small and realising: ‘I can save that.’”
The number of self-employed workers saving into a pension has fallen from 30 per cent to 20 per cent in the past decade. Hunt said: “Britain’s entrepreneurs are the backbone of our economy, but when it comes to preparing for retirement many are missing out on billions in free money from the government.”
This “free money” includes pension tax relief, which tops up contributions to a personal pension. If a basic-rate income taxpayer contributes £100 to their pension this would be topped up to £125 by the government — and it could be even more if they are a higher-rate taxpayer.
What you can do
Fidelity analysis found that self-employed workers claimed £1 billion of the £49.8 billion in income tax relief on pension contributions. “Unlike employees, the self-employed don’t have auto-enrolment prompting them to save, and irregular income can make it harder to commit. But the impact is stark.”
Some pension schemes offer “relief at source”, which will claim the tax relief for you. But someone who pays higher or additional-rate income tax will need to claim through a self-assessment tax return. Higher-rate taxpayers get 40 per cent tax relief and additional-rate payers 45 per cent.
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Figures from the pension firm Scottish Widows found that self-employed women were more likely to be saving for a rainy day than those in permanent roles, despite having a lower income on average. Its data showed that 21 per cent of self-employed women had more than £10,000 in savings, compared with 18 per cent of women in employed work. But this does not always translate to saving in a pension-specific fund.
Claire Bartlett, 41, from Solihull, became self-employed after looking for more flexibility in her work, and now runs an accounting business and works as a business coach. “I didn’t think about it for a long time, and then when I reached my forties I realised I needed to start thinking about retirement. I feel I have started too late.”
She contributes through auto-enrolment and says she has about £10,000 in her pension, “if that”. “I planned to buy properties and use that as a way of topping up my pension — I haven’t been able to realise that plan yet, but I still hope to,” she said.
Fred Hicks from IPSE, a trade body for the self-employed, said: “When you’re focused on your business, it can feel tricky to dedicate the time to thinking about retirement, especially when it’s a long way off.”
But he said there were “little things” that can be done to boost a pension early on. This includes opening a Sipp in which every contribution automatically gets the 20 per cent tax relief. If you haven’t used your pension allowance from previous years, you can carry this forward for up to three tax years.