I’m self-employed - how much should I save for retirement?

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

Many self-employed workers come to pensions late - having spent years prioritising their business. Unfortunately, that means long periods of missing out on investment growth, which makes catching up that much harder.

However, late is always better than never, and having a clear idea of how much you need to save will help focus your efforts. How much should I put in my pension if I’m self-employed?

How much should I put in my pension if I’m self-employed?

Unlike employees, entrepreneurs aren't automatically enrolled in a workplace pension. They also don't get employer contributions. That means the responsibility, and the cost, of building a retirement fund falls entirely on your shoulders.

There's no fixed rule for how much you'll need for a comfortable retirement. It depends on many factors, including when you start saving and how you want to live later. But there are rough guidelines. 

The pensions industry suggests saving about 12% of your gross (i.e. pre-tax) income throughout your career. 

Most employees will already be part of the way there. Under auto-enrolment, employees must contribute at least 5% of their qualifying earnings and their employer adds another 3%. Some employers will also match contributions you make above this amount.

But if you’re self-employed, you need to make those payments on your own.

However, for the self-employed, the responsibility for contributions lies solely with you.

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What if I’m starting later in life?

If you begin late, 12% of your salary may not get you to your goal. Benchmarks can help you see if you’re on track by different ages.

Our own Fidelity research suggests that, by age 30, you should aim to have saved the equivalent of your annual income for retirement - which can mean money both inside and outside of pensions. So, if your income is £30,000 a year before tax, you should aim to have £30,000 worth of retirement savings.

How much to save by age 30? In this video Jemma Slingo shares the amounts to save each month.

By age 40, we estimate you should have 2x your annual income in long-term savings; by age 50: 4x your income; by age 60: 6x your income; and by retirement age: 7x your income.

• Read more on the maths - How much should you have saved by 30, 40, 50 & 60?

Remember - these are guidelines, not hard rules. Targets like these can sometimes appear hard to reach, particularly if you’ve delayed your savings to prioritise other things or had variable income from your business. That’s OK - it’s still useful to understand them and gauge your progress. Even if you’re behind on your saving, there is almost always something you can do.

• You can use our retirement calculator to check whether your savings are on track.

Another rule of thumb is the 25x rule: multiply your desired annual retirement income by 25 to estimate the size of the pension pot you’ll need. For example, if you want £20,000 a year in retirement, you’ll need around £500,000 saved.

But this doesn't account for inflation, care costs, or how long you might live.

Start small, start early

The good news is that you don’t need huge amounts to begin. Even £50 a month can add up, thanks to compound growth and tax relief. If you’re a basic-rate taxpayer, the government puts in £20 for every £80 you add. Higher-rate taxpayers can claim more on their tax return. 

The earlier you start, the more time your money has to grow. A small amount saved in your 30s can outgrow a bigger contribution that begins in your 50s. Time is your most powerful ally.

For example, if you’re 30 and earn £30,000 a year before tax, increasing your savings by just 1% of your pre-tax salary (£25 per month) could give you an extra £55,200 to enjoy life if you retire at 68. Increase your savings by 2% and it could add an extra £110,400 to your pension pot.

• Use our Power of Small Amounts calculator to see what difference a few tweaks could make to your retirement

If you operate through a limited company, you can also make employer contributions, which are tax-deductible as a business expense.

Balancing pension saving with cash flow

Irregular income is a common challenge for the self-employed. But a Self-Invested Personal Pension (SIPP) gives you options. You can pay monthly or in lump sums whenever you have funds. That might be after a strong quarter or near the end of the tax year. 

If money is tight, think about setting up a direct debit for a small amount each month. You can increase it later: consistency is key. 

If your income varies year to year, look into carry forward rules. These could let you use unused pension allowance from the previous three tax years. This means you can make larger contributions in more profitable years while still benefiting from tax relief.

• Open a Self-Invested Personal Pension (SIPP)
• Read more on  investing regularly

What about the state pension?

Most of us will also receive a regular income from the government once we hit state pension age. The state pension currently pays around £12,000/year, which rises with inflation, average earnings or by 2.5% (whichever is highest).

If you’re self-employed, you can still qualify, but you must meet National Insurance (NI) conditions. NI payments aren’t taken automatically out of your pay like they are for employees. To get any state pension, you need at least 10 qualifying years of NI contributions. For the full new state pension, you need 35 qualifying years. 

You earn these by making Class 2 NI contributions. Self-employed workers must pay these if their profits are above the Small Profits Threshold (£6,725 for 2024/25).

If your profits fall below the threshold, you can choose to pay Class 2 NICs voluntarily to maintain your NI record. You can check your state pension forecast and NI contribution history on the UK Government website.

Final thoughts

Being self-employed gives you flexibility, but it also means taking full responsibility for your financial future. The earlier you start saving, even in small amounts, the easier it will be to build a retirement pot that suits your goals.

Don’t wait for the “perfect time.” Start now, review your plan annually, and adjust as your income grows. Your future self will thank you.

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Check out our other articles in this series:

• Read: Best investments for a self-employed pension - whatever your age
• Read: Pension, ISA or property for the self-employed: which is better?
• Read: 5 big tax breaks the self-employed miss out on
• Read: Self-employed and pensions: how to get started with a SIPP