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Friday 14th June 2024

I’m self employed, is there any point in me setting up a pension? 

Mouthy Money Your Questions Answered panelist, Becky O’Connor, answers a reader’s question on the benefits of setting up a pension when you’re self employed. 

Setting up a pension when you're self-employed. Picture: a woman smiling in a room with a lamp in the background.


Q I’m self employed so don’t have a pension. Is there any point in me setting one up given that I don’t have an employer to make contributions to it? 

A Absolutely! Unlike employees who are automatically enrolled in workplace pension schemes, self-employed workers have to take on a greater responsibility for their retirement savings.

This can be difficult as there is no one to choose a pension scheme for you and your income may fluctuate, but there are many advantages to having a pension.  

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Setting up a pension ensures you have a dedicated source of income when you retire, instead of having to rely solely on your business or other investments.

While most people are eligible for some state pension support, on its own, it’s unlikely to provide you with enough money to maintain the standard of living you might like. So, it’s important to plan ahead to provide yourself with the rest of the retirement income you’ll need in later life. 

Many pension providers offer dedicated self-employed pension products which allow for flexibility in terms of minimum contributions and how regularly you have to contribute. At PensionBee, for example, you can set up a self-employed pension, by transferring your old pensions into one simple online plan or by creating a new pension if you’ve never saved towards retirement before.  

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While it may seem like an added expense now, consider it a long-term investment in your future. The earlier you start saving, the more time your money has to grow through compound interest and even small, regular contributions can make a big difference when it comes to retirement.  

It’s also worth noting that self-employed pensions often come with tax advantages, as pension contributions are usually classed as a business expense if you’re a director of a limited company.

This means you not only receive tax relief on personal contributions you make, but you could also save on corporation tax on payments made directly from your business.

In addition, pension contributions come from your pre-tax income. This means that by making pension contributions, you could see a reduction in your National Insurance contributions, allowing you to take home more of the money you’ve earned.  

Becky O’Connor is the Director of Public Affairs at leading online pension provider PensionBee. She is a personal finance and investment expert and award-winning journalist with two decades of experience in journalism and communications. Becky is the Telegraph’s ‘Pensions Doctor’ and is also a columnist for the i paper. Prior to joining PensionBee, Becky was Head of Pensions at Interactive Investor, and previously acted as a spokesperson for Royal London, the mutual insurer. Becky is also the co-founder of the ethical personal finance website, Good With Money; the author of a book on sustainable investment, The ESG Investing Handbook, Chair of the Ethical Advisory Committee for Castlefield Investment Management and a fellow of the Royal Society of Arts.  

Photo credits: Pexels

Rebecca Goodman

Award-winning freelance journalist with a decade of experience working for online and print publications in the consumer sector.

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