If you’re self-employed in Peterborough, you’ll know how rewarding (and unpredictable) working for yourself can be. You juggle everything – from clients to cash flow – so it’s no wonder that pensions often end up near the bottom of your to-do list.
Unlike employees, you don’t get auto-enrolled, nor do you have a helpful HR department nudging you to make a start. Instead, it’s down to you – and let’s face it, putting money away for a retirement that might be decades away isn’t always top priority.
But here’s the truth: a pension is not just another savings pot. It’s one of the most tax-efficient ways to grow your wealth for the future – and getting started is easier (and more affordable) than you might think.
Why Set Up a Pension if You’re Self-Employed?
Let’s start with the incentive that makes pensions stand out: tax relief. When you pay into a pension, the Government adds 25% in basic-rate tax relief. So, if you contribute £80, HMRC tops it up to £100. Higher or additional rate taxpayer? You can claim back even more via your self-assessment tax return.
On top of that:
Unlike employees, you don’t get auto-enrolled, nor do you have a helpful HR department nudging you to make a start. Instead, it’s down to you – and let’s face it, putting money away for a retirement that might be decades away isn’t always top priority.
But here’s the truth: a pension is not just another savings pot. It’s one of the most tax-efficient ways to grow your wealth for the future – and getting started is easier (and more affordable) than you might think.
Why Set Up a Pension if You’re Self-Employed?
Let’s start with the incentive that makes pensions stand out: tax relief. When you pay into a pension, the Government adds 25% in basic-rate tax relief. So, if you contribute £80, HMRC tops it up to £100. Higher or additional rate taxpayer? You can claim back even more via your self-assessment tax return.
On top of that:
- Your money grows tax-free. No income tax. No capital gains tax.
- You can take 25% of your pension tax-free from the age of 55 (rising to 57 in 2028).
- You retain full control of how much to contribute and where to invest.
SIPP vs Personal Pension: What’s Right for You?
As someone who’s self-employed, you have flexibility – but also responsibility – when it comes to choosing a pension. Two of the most popular options are:
1. Self-Invested Personal Pension (SIPP)
A SIPP offers greater control. You decide how much to put in, and where to invest your pension pot. From shares and funds to bonds and commercial property (in some cases), it’s designed for those who want hands-on involvement.
You can often start with as little as £25 per month, though minimum contributions vary by provider – so it’s worth comparing a few to find one that suits your current budget.
2. Personal Pension
If you’d rather leave investment decisions to the experts, a personal pension is a simpler, more hands-off choice. You still benefit from the same generous tax perks, but your contributions are invested in a pre-chosen mix of funds managed by professionals.
This can be a great fit if you’re busy running your business and want to save for retirement without the hassle of day-to-day management.
How Much Can You Contribute?
In most cases, you can contribute up to 100% of your earnings, up to an annual limit of £60,000 (including tax relief). However, this may be lower if your income exceeds £260,000 or if you’ve already started drawing down on a pension.
For self-employed individuals, your earnings generally refer to net profits after expenses, as reported on your self-assessment tax return. Income from dividends or most rental income doesn’t count, so it’s worth checking your numbers carefully or speaking to an adviser.
Don’t Miss Out
As a financial adviser based here in Peterborough, I’ve spoken to many business owners who regret not starting their pension sooner. But the good news is – it’s never too late. Whether you’re a sole trader, freelancer or director of your own limited company, the pension system is designed to reward you for investing in your future.
Want to explore your options or find a provider with a minimum contribution that suits your current situation? Get in touch for a free consultation – and take one small step toward securing your long-term financial wellbeing.
Please note:
The value of investments and the income from them can fall as well as rise. You may not get back the amount originally invested. Past performance is not a reliable indicator of future performance. Pensions are a long-term investment. The tax treatment of pensions depends on individual circumstances and may be subject to change in the future.
This article is for information purposes only and does not constitute financial advice. You should seek independent financial advice before making any decisions about your pension or investment options.
Need help getting started with a pension?
Drop me a message or pop into our Peterborough office – we’re here to help you take control of your future.
Kat – IFA/Director
