A guide to self-employed pensions
If you're self-employed, planning for retirement is completely down to you. Unlike employees with workplace pensions, you won’t have an employer automatically setting up a pension scheme for you. That means it's important for you to stay on top of your pension planning.
It can be a bit overwhelming, but you don’t need to figure it all out on your own. In this guide, we’ll look at how self-employed pensions work, how to set one up and make contributions, how they differ from typical workplace pensions, and the potential benefits.
Before we get into it, a reminder that we can’t give you tax or financial advice – you’ll need to speak to a professional adviser for that.
What are self-employed (or personal) pensions?
There isn't technically such a thing as a 'self-employed pension'. But most people who are self-employed tend to invest in their future using personal pensions or self-invested personal pensions (SIPPs).
A personal pension is a defined contribution pension scheme where you choose how much to contribute and when. Your contributions get invested by the pension provider, and the amount you'll have at retirement depends on what you paid in and how well the investments performed – minus any fees you've had to pay.
A SIPP (self-invested personal pension) is a type of personal pension that typically gives you more control over where your money's invested. With a SIPP, you can usually choose from a wider range of investments including funds, shares, and other assets.
Some people also use stakeholder pensions, which are personal pensions that must meet government requirements, including limits on charges. Or they use National Employment Savings Trust (NEST) pensions, which is a government-backed workplace pension scheme that also accepts self-employed people.
You can choose one or more options from the above, depending on what suits your situation best.
Setting up and contributing to a self-employed pension
To set up a self-employed pension, start by researching different providers. You'll probably want to familiarise yourself with contribution limits and pension rules before you commit. If you're not sure what option is right for you, you can speak to an independent financial adviser. They can also help you determine a healthy and achievable contribution amount that fits your income.
Once you've set up your pension, you can contribute as much or as little as you want, within certain limits.
Tax on pension contributions: understanding your annual allowance
Your annual allowance is the most you can save into your pension in a tax year (6 April to 5 April) before you have to pay tax.
For most people, this is £60,000 this tax year (2025-2026), or 100% of your income if that’s lower. Your annual allowance will be adjusted down if you have a high income. You can contribute more than this amount, but you’ll only pay tax if you go above your annual allowance.
If you haven’t used your full annual allowance in the previous three tax years, you may be able to carry forward unused allowances.
While there isn't a hard 'limit' on contributions to a pension, it’s a good idea to take tax into account when working out how much you’ll contribute to your pension each year. But remember, the taxes you pay depend on your circumstances and rules could change in the future.
If you're self-employed, you can easily set up a pension with Monzo. We'll tell you how to do this in a minute.
How much should I contribute to my self-employed pension?
There's no one-size-fits-all answer, but a good baseline is around 5% of your monthly income. If you have a particularly productive month, you might want to increase this.
The important thing is to contribute what you can afford consistently, without putting strain on your day-to-day finances. For example, sacrificing your emergency fund or essential expenses to max out your pension contributions might not be helpful for you in the present moment – especially as you can’t take the money you put into your pension back out again.
It’s usually a good idea to get independent financial advice before committing to a specific pension contribution amount. An adviser can help you work out what's right for your situation, and you can also use the Retirement Living Standards to help you with this – these are a set of retirement lifestyles the Pensions and Lifetime Savings Association (PLSA) created. They’re labelled as ‘minimum’, ‘moderate’ and ‘comfortable’, and show the typical yearly income needed to achieve each one. We created this case study to bring these lifestyles to life.
What are the benefits of self-employed pensions?
Self-employed pensions come with several potential benefits:
Tax relief on contributions
Tax relief means you don’t pay income tax on the money you put into your pension (as long as you haven’t gone over the annual allowance). The government refunds the tax you’ve already paid, boosting your pension contribution – and you get tax relief on your pension contributions regardless of your tax bracket. It’s the main benefit of contributing to a pension.
Here's how it works: for every 80p you contribute, the government adds 20p in basic rate tax relief, making it £1 in your pension. If you're a higher rate taxpayer (40%), you can claim an additional 20% through your self-assessment tax return. Additional rate taxpayers (45%) can claim 25%.
If you pay Scottish income tax, the rates and thresholds are different, but you can still claim the difference between the basic rate and your highest rate through your tax return.
More control over where your money's invested
Unlike a workplace pension where your employer chooses the scheme, you have complete control over your self-employed pension. You pick the provider, decide how much to contribute, and choose where you’d like your money to be invested (from the investments your pension provider has on offer). And with a SIPP, you could also have a wider range of investments to choose from.
Saving for your comfort in retirement
Setting yourself up for a comfortable retirement is often the main goal of having a pension. Starting early and contributing regularly can make a big difference to your quality of life later.
Self-employed pensions with Monzo
If you're juggling multiple old pensions on top of managing your self employment, we can help! With Monzo pensions, you can make contributions, and find and combine your old ones in one easy-to-manage account. Your money is invested with BlackRock, and you can track everything in the Monzo app.
Here's what else you get:
Transparent fees (0.63% total, or 0.53% if you have Plus, Premium, Extra, Perks or Max)
BlackRock LifePath Target Date Funds that adjust as you get closer to retirement
Bite-sized lessons in the app to help you understand pensions better
Preparing for the future
If you’re self-employed, you probably need to pay more attention to pensions because you're solely responsible for them. There's no employer to auto-enrol you or match your contributions. But with the right planning and regular contributions, you can build a pension that supports you in retirement.
Our pension service can make it easier to manage your retirement savings. Our contribution feature lets you add money to your pension whenever you want, and our consolidation service brings all your old pensions together in one place.
You can switch to Monzo pensions or combine your pensions with Monzo online.
The value of your pension could go up or down and you could get back less than you put in. You need a free Monzo current account to open a Monzo Pension. 18-70 years old only. UK residents only. Ts&Cs apply.
Questions? Answers.
Do self-employed people get the State Pension?
Yes, self-employed people can get the State Pension. You need 35 years of contributions to your National Insurance record to receive the full State Pension¹⁰. Check gov.uk for how much you’ll get on the State Pension.
Which pensions can a self-employed person get?
Self-employed people can choose from several pension types: personal pensions, self-invested personal pensions (SIPPs), stakeholder pensions, or NEST pensions. You can also combine these with the State Pension.
How do I set up a self-employed pension?
Setting up a self-employed pension is quite straightforward. Start by researching pension providers to find one that suits your needs. Then compare fees, investment options and features. You can apply online or over the phone with your National Insurance number and bank details.
Most providers let you start with small regular contributions or one-off payments. You'll usually get basic rate tax relief added automatically to your contributions and can claim relief for higher rates through your tax return.
Do I need a pension if I’m self-employed?
You don't legally need a pension if you're self-employed, but it's usually recommended. Without a workplace pension, you'll rely solely on the State Pension, which probably won't be enough to maintain your lifestyle in retirement. Starting a pension early, even with small contributions, can make a big difference thanks to compound growth and tax relief over time.
Can I get a self-employed pension with Monzo?
Yes, you can use Monzo pensions to save for retirement if you're self-employed. We offer a SIPP that lets you make contributions whenever you want, and combine old pensions from previous jobs. You'll get tax relief added automatically, and your money's invested with BlackRock. It's all managed through the Monzo app, making it simple to track your retirement savings.