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Pension Awareness Week, which aims to improve understanding of and engagement with pensions, runs from 15 to 19 September. It’s a great opportunity to take control of your retirement planning and ensure you’re on track for the future you want.
If you’re self-employed and don’t think pensions are for you, you’re not alone. According to the latest Pensions Commission interim report from the Department for Work and Pensions, only 17% of self-employed individuals in the UK currently save into a pension, which falls to just 4% for those who earn only from self-employment.
Unfortunately, neglecting pensions could make it harder to achieve the retirement you want.
Keep reading to learn the truth behind three common misconceptions about pensions for self-employed people that might be holding you back from building the retirement wealth you need.
1. “Self-employed people can’t get a pension”
The government rolled out pension auto-enrolment gradually in the UK from October 2012. Today, all employers except single-director companies are legally required to enrol eligible employees into a pension scheme.
There’s no such automatic enrolment for self-employed people, which might be why many entrepreneurs and business owners mistakenly believe they can’t get a pension.
In fact, there are plenty of personal and private pensions for self-employed individuals; you’ll just have to do the research and admin yourself.
Here are a few options to consider:
- Personal pensions – Managed private schemes where your provider will invest your contributions into funds based on your preferred risk level. A stakeholder pension is a type of personal pension that typically offers low minimum contributions and government-capped annual fees.
- Self-invested personal pensions (SIPPs) – If you want to take full control of your pension savings, a SIPP might be worth considering because it allows you to choose and manage your own investments.
- National Employment Savings Trust (NEST) – This is a low-cost, government-backed scheme open to self-employed individuals and single-person company directors.
A financial planner can help you explore your options and work out what’s most appropriate for your needs, goals, and budget.
Read more: Everything you need to know about SIPPs: A practical guide for the self-employed and business owners
2. “The State Pension will fund my retirement”
Most people pay into the State Pension throughout their working life, whether they’re employed or self-employed. If you’ve contributed for many years, you might assume there’ll be enough in your pot to support you in retirement.
Unfortunately, this sense of security could be misleading.
You need 35 qualifying years of National Insurance contributions (NICs) to receive the full new State Pension. If you’re self-employed or you’ve taken career breaks, you might have gaps in your National Insurance record that mean your entitlement is lower.
Moreover, the full new State Pension is only just over £12,547.60 a year (2026/27). This income on its own is unlikely to cover more than basic living costs. Indeed, Pensions UK estimates that a single person needs £13,900 a year to fund a “minimum” standard of living, rising to £32,700 and £45,400 a year, respectively, to support a “moderate” or “comfortable” lifestyle.
Also, remember that you’ll have to wait until you reach State Pension Age before you can start drawing on this income. This is rising from 66 to 67 between April 2026 and 2028, then to 68 between 2044 and 2046.
As you can see, relying solely on your State Pension to fund your retirement could offer limited flexibility and make it harder to achieve the lifestyle you want after leaving work behind.
3. “My business is my pension”
If you’ve invested time, energy, and money into building a successful business, it might seem logical to view this asset as your primary source of retirement income.
However, relying solely on your business to fund life after work could be a risky strategy because:
- The value of your business is not guaranteed – It depends on market conditions, profitability, buyer demand, and much more. All of which could force you to sell at a lower price than you hoped to achieve.
- Selling could take time – You might have a date in mind for exiting your business, but if you can’t find a buyer or unexpected factors force you to sell earlier, this could hamper your retirement plans.
- This approach lacks diversification – If your retirement plans rely completely on your business, you’ll have no alternative income source to fall back on if this one asset underperforms.
In contrast, building a pension alongside your self-employed income could allow you to benefit from tax relief on contributions and make your retirement income more resilient through diversification.
Get in touch
At Sovereign, we specialise in supporting self-employed individuals and business owners with all their financial planning needs.
If you’re self-employed without a pension, we can help you review your options and build a diversified, sustainable retirement income to fund the future you want.
Email hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Approved by Best Practice IFA Group Ltd on: 20/8/26