06 April 2024

Only about one in five self-employed people are paying into a pension. In the short term, that can seem like a sensible budgeting move. And if you’re self-employed, you may not have access to a workplace pension scheme that automatically:

  • Deducts contributions from your earnings
  • Matches them with contributions from your employer


But it also creates some very real longer-term problems. As Katharine Photiou, Commercial Director of Workplace Savings at Legal & General, comments:

“Even if you start saving in the future, your money won’t have as much time to grow – though of course as with any investment its value can go down too. And if you just rely on the State Pension, you might end up not being able to afford your ideal retirement lifestyle.”

The new State Pension for 2024/25 is £11,502.40 a year. If you’re part of a couple and both of you get that much, you could end up with a minimum retirement standard of living. That’s according to the Retirement Living Standards (RLS). But if not, or if you want a moderate or comfortable lifestyle, you’ll fall short by anything between about £3,000 and £35,000 a year. Again, that’s based on RLS figures.

So if you want to make sure you’re saving enough to enjoy more than a very basic later life, you’ll need to take charge of your own retirement planning. One of the best ways of doing this is to set up and save into a personal pension. In 2021/22, 7.5 million UK people were already doing just that.

What is a personal pension and why should you save into one?

A personal pension is a type of retirement savings plan that lets you:

  • Invest your money in a range of different funds
  • Get tax relief on your contributions

You can choose how much and how often you pay into it. And you can access your savings once you turn 55 (or 57 from 2028 on).

Interested in a Personal Pension?

If you’re self-employed, our Personal Pension is a flexible and tax-efficient way to save for your retirement – and you’ll get a 25% government top-up.

There are many good reasons for saving into a pension – here are three of the most important ones:

Tax relief

One of the great things about a pension is that you can get 20% tax relief on all or some of money you invest in it. Your provider claims that relief and adds it to your pension. The exact amount of money you can get relief on is called your Annual Allowance. It’s usually whichever is lower of either £60,000 or your annual UK earnings.

To get it, you’ll need to find a personal pension offering “relief at source”. That means that your pension provider will claim 20% tax relief from the government and add it to your pot. Depending on your tax rate, you might also be able to claim extra relief via Self Assessment too.

This table shows the different levels of tax relief you can get on a £10,000 investment, based on the three income tax brackets in England, Northern Ireland and Wales:


UK (exc. Scotland) 20% basic rate 40% higher rate 45% additional rate
You pay in £10,000 £10,000 £10,000
Extra 25% (equivalent to 20% at source) £2,500 £2,500 £2,500
Total investment value £12,500 £12,500 £12,500
Extra you can claim via Self Assessment £0.00 £2,500 £3,125
Total investment cost £10,000 £7,500 £6,875

Income tax relief in Scotland

If you pay income tax in Scotland, you’ll still get the 25% top up, which is equivalent to 20% at source. Any additional tax relief you can claim from HMRC will differ. This table shows the different levels of tax relief you can get on a £10,000 investment, based on Scotland's five income tax brackets.


Scotland 19% starter rate 20% basic rate 21% intermediate rate 42% higher rate 45% advanced rate 48% top rate
You pay in £10,000 £10,000 £10,000 £10,000 £10,000 £10,000
Extra 25% (equivalent to 20% at source) £2,500 £2,500 £2,500 £2,500 £2,500 £2,500
Total investment value £12,500 £12,500 £12,500 £12,500 £12,500 £12,500
Extra you can claim via Self Assessment £0.00 £0.00 £125 £2,750 £3,125 £3,500
Total investment cost







Note that these are the figures for the 2024/25 tax year only. They could change in the future. And if you pay in more than your Annual Allowance, you might have to repay some of the tax relief you received. For more info, check out our Pension tax relief benefits article.

Growth potential

When you save into a personal pension your money can grow over time – though as with any investment your money can lose as well as gain value. The earlier you start saving the more time your investments have to ride out any market ups and downs. How well they do will depend on:

  • How much you contribute
  • How long you invest
  • How well your funds perform

We always recommend starting to pay into your pension as early in your career as possible and making even small payments as often as you can. You can learn more in our article 'How much should I pay into my pension?'


You can choose how much you want to save and how often you pay into your pension. And you can stop your payments altogether if you’re not invoicing out as much as you’d like.

Once your money’s in your pension you can invest it in many different funds, depending on your risk appetite and your retirement goals. And you can switch between different funds or providers if you’re not happy with the performance or the fees of your current scheme.

What next?

  • If you already have a personal pension then we’d recommend checking your tax status before the end of the tax year and making sure you’re making the most of it
  • If you don’t have a pension then we’d recommend setting one up and starting your retirement savings journey – even a little saved now can make a big difference later on
  • If you’re newly self-employed a pension should be part of your financial planning – our Self-employed pensions article will tell you how one can help you plan for your long-term future
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