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 - and don’t have an employer automatically contributing toward their retirement. Unfortunately, that means long periods of missing out on investment growth - making 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?

Unlike employees, entrepreneurs don’t benefit from being automatically enrolled into a workplace pension or from employer contributions. That means the responsibility, and the cost, of building a retirement fund falls entirely on your shoulders.

There is no hard and fast rule on how much people need to save for a comfortable retirement: it will depend on many factors, including when you start saving and what sort of lifestyle you want in later life. But there are rough guides.

The pensions industry estimates that people should be saving around 12% of their pre-tax income throughout their career to ensure they have enough money to retire comfortably.

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.

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?

Putting 12% of your salary into your pension is unlikely to get you where you need to be if you’re starting to save later in life.

Instead, there are various benchmarks that give you a rough guide to how much you should have saved by various 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.

However, this second method has been criticised as it does not account for inflation, care costs or how long you will live.

Start small, start early

The good news? You don’t need to start with large sums. Even saving £50 a month can make a meaningful difference over time, especially with compound growth and tax relief. For every £80 you contribute, the government adds £20 if you’re a basic-rate taxpayer. Higher-rate taxpayers can claim even more through their tax return.

Starting early gives your money more time to grow. A small monthly contribution in your 30s can be worth more than a larger one started 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. Fortunately, pension products like Self-Invested Personal Pensions (SIPPs) offer flexibility. You can contribute monthly or make lump-sum payments when cash flow allows, such as after a profitable quarter or at the end of the tax year.

If you’re just starting out or experiencing lean months, consider setting up a direct debit for a modest amount. You can always increase it later. The key is consistency.

If your income varies year to year, you can take advantage of carry forward rules, which 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, earnings or by 2.5% (whichever is highest).

Self-employed workers in the UK can qualify for the state pension, but they must actively ensure they meet the National Insurance (NI) contribution requirements, since contributions aren't automatically deducted like they are for employees.

To be eligible for any state pension amount, entrepreneurs need 10 qualifying years of NI contributions, and, to get the full new state pension, they need 35 qualifying years.

You gain qualifying years 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 pension pot that supports the lifestyle you want in retirement.

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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