Pensions for the self-employed
Don't get caught out when you retire. If you're self-employed, you might want to think about how you'll fund your retirement.
Important information - The value of investments can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. You cannot normally access money in a SIPP until age 55 (57 from 2028). It is important to understand that pension transfers are a complex area and may not be suitable for everyone.
Self-employed pension options
According to the Institute for Fiscal Studies (IFS), less than 20% of self-employed workers earning over £10,000 pay into any kind of pension, versus 80% of those who have an employer and earn over £10,000. This page looks at the different pension options open to you and compares them to owning property as your pension.
Source: Private pensions for the self-employed: challenges and options for reform, Institute for Fiscal Studies, September 2024.
To be eligible for the State Pension you'll need at least 10 qualifying years of National Insurance contributions or credits. If you're self-employed, you will usually need to pay your National Insurance contributions through your self-assessment tax return. MoneyHelper has more information on the type of contributions you will need to pay, and the benefits those contributions pay for.
Although valuable, the State Pension alone is unlikely to maintain the lifestyle you've enjoyed before retirement, which is why SIPPs (Self-Invested Personal Pensions) are a particularly attractive option to the self-employed, or those who change their career regularly.
A SIPP is a flexible and convenient way to save for retirement. You choose what to invest in and when, and you can usually make withdrawals from age 55 (57 from 2028).
The government will contribute 20% basic rate tax relief on any payments you make into your SIPP (up to a maximum of £60,000, capped at the amount you earn if this is less), making SIPPs one of the most tax-efficient ways to save. For example, if you pay in £800, HMRC will add £200 - and more if you’re a higher rate taxpayer.
Your SIPP grows free of income and capital gains tax over time and you can normally take up to 25% tax free cash, with the rest of your withdrawals subject to income tax at your marginal rate.
More about pension tax benefits and allowances
Why our SIPP?
Our award-winning SIPP offers many benefits to help you make the most of your money:
- Start your SIPP today from as little as £20 a month with our regular savings plan, a lump sum payment of £800, or by transferring a pension in. Employers, your limited company, or someone else you know can also pay in.
- Our typical service fee is just 0.35% (investment charges set by the companies and funds you’re investing into will also apply).
- Wide investment options, including thousands of funds and shares, giving you more ways to reach your goals. Plus, investment ideas and easy-to-use tools to help you choose and get started.
- Plenty of online guidance and expert insights. Plus, dedicated teams you can talk to for extra support.
- Flexible income options (pension drawdown) when you're ready to access your money.
Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
Open a SIPP
Ready to open a SIPP? First, please tell us who will be paying into it...
I'm paying in
If you will be the primary person paying in to the SIPP, you can open an account online now.
My employer is paying
If your employer will be the primary payer to the SIPP, you can open an account using this form.
Someone else is paying
If a spouse, partner, friend or relative will be the primary payer to the SIPP, you can open an account using this form.
If you have any questions please call us on 0800 368 1722.
Self-employed pension FAQs
The amount you should contribute to your pension will depend on your income, lifestyle, attitude to risk and how you would like to live in retirement.
Our retirement calculator can help you decide what kind of lifestyle you'd like in retirement and if you're on track to achieving it.
The tax relief you can claim on your pension contributions will depend on the amount you contribute and on the level of income tax you pay. Contributions to a personal pension are topped up by the government at the basic rate of 20%, so a £1,000 contribution will only cost you £800. Fidelity will claim this automatically on your behalf. For those who pay income tax at a higher rate (i.e. 40% and 45% for individuals living in the UK) you will be able to claim the additional tax relief through your tax return or by writing to HMRC. Tax rates may differ if you live in Scotland.
If you employ yourself through a limited company and make contributions through that company, the company may be able to claim corporation tax relief. If your contributions are made through a limited company personal tax relief will not be available on those contributions.
If you are self-employed, you’ll need to be paying class 2 National Insurance contributions (NIC) to ensure you qualify to receive the State Pension. The amount self-employed workers are entitled to is calculated in the same way as anyone else. You can read more about the MoneyHelper website or visit Gov.uk to find out how much State Pension you might get.
The differing levels of property wealth between the employed and self-employed goes some way to offsetting the low pension rates among the self-employed.
According to the Institute for Fiscal Studies, self-employed workers have higher levels of property wealth, particularly in properties other than the main home.
This belief is reflected in research that shows 18% of self-employed people own net property wealth over £500,000 versus only 10% of the employed2.
Source: 1Institute for Fiscal Studies, Private pensions for the self-employed: challenges and options for reform, September 2024.
2Property wealth: wealth in Great Britain, Office for National Statistics, January 2022.
Pension or property?
One of the attractions of property has been a steady rise in house prices since the turn of the millennium, making property a much more tangible investment than stocks.
Over the long term however, stocks have generally performed better than house prices over a 30-year period.
It's important to note that the past performance of both the property market and the stock market is not a reliable indicator of what might happen in the future.
Source: Fidelity, Datastream, Nationwide. Basis: GBP with income reinvested.
Based on the performance of the FTSE All-Share Index between 31 Dec 1994 - 31 Dec 2024 and does not take into account the impact of any
ongoing fund charges or service fees. Fidelity has been licensed by FTSE International Limited to use the name FTSE All-Share Index.
Tax features of pensions and property
Pensions
- Contributions to a pension are topped up by 20% by the government. If you pay tax at above the basic rate you may be able to claim further tax relief in your annual tax return*
- Investments held within a pension don’t usually suffer income or capital gains tax (CGT) and don’t currently form part of your estate on death so are not subject to inheritance tax (although this is due to change on 6 April 2027)
- You can normally take up to 25% of your savings as tax-free cash from age 55 onwards (57 from 2028). Any further income is taxable at your marginal rate of income tax
Property
- Stamp Duty on additional properties is calculated at 5% more than the rate you pay for your main residence - up from 3% following the Budget on 30 October 2024
- Capital Gains Tax is due on the sale of residential property that is not your home. However individuals do have an annual capital gains allowance they can use
- Income from renting a property is usually taxable at your marginal rate of income tax potentially pushing you into a higher tax bracket
*Tax relief is only available on the lower of the annual allowance (currently £60,000) or 100% of your earnings in a given tax year (or to £3,600 if you have no earnings). If you exceed your annual allowance you may have a tax charge to pay unless you have unused allowance you can carry forward. If you have earnings of £200,000 or more, the amount you can pay in and receive tax relief on could be ' tapered' down to £10,000. Alternatively, if you’ve already taken taxable income from your pension pot, your annual allowance may be £10,000 (known as the money purchase annual allowance) and you will not be able to use carry forward to contribute to a SIPP.
For more information on tax relief and all the allowances please visit our pension allowances page.
