Skip Header

Self-employed and no pension?

Ed Monk

Ed Monk - Fidelity Personal Investing

Self-employment means the flexibility to work the hours you choose, to escape morning commutes and office politics.

Self-employed and no pension?

Young people, in particular, see self-employment as the preferable way to work. In recent research that we conducted - The Modern Life Moments Report - it was highlighted that working habits are changing, and with a greater shift across all industries towards self-employment. Some 4.8m are now self-employed, compared to 3m in the 1990s, and trends show this is set to keep increasing.

The average age of making the leap to self-employment is 42, and it is important to note that the clear majority of those who work for themselves are doing it because they choose to, not because they are forced into it because of a poor job market.

This greater freedom is to be celebrated, but it does mean those working for themselves have a greater responsibility for their own financial futures.

This came home to me on a recent day of filming, when we were working with a video production crew. Media work often involves teams of self-employed individuals coming together for a particular job. Between takes, one of the cameramen asked how he could kick-start his pension saving. It was clear that he was well aware of the need to save, and confessed to feeling increasingly concerned that he was not putting anything aside for his retirement, but was unsure where to start - and whether he had left things too late to be able to make a difference.

Here’s what people in that position need to know to get their retirement saving on track.

It’s not too late!

Even people with nothing saved after many years in work can make a huge difference to their retirement income. For example, if you’re 40 years old with nothing in a pension, you still have 25 years or more to save and let investment returns grow.

But it is crucial to start saving, even if the amounts you put aside feel insignificant. You can set up a Self-invested Personal Pension, or SIPP, and contribute as little as £40 a month. That might not be enough to give you the retirement you want, but from that starting point you can accelerate your saving.

It might not cost as much as you think

Saving into a pension means you have to forgo money that you could otherwise keep and spend, but tax relief on pension contributions means the sacrifice may be less than you think. To pay in a total of £1,000 to your SIPP, you would only need to contribute £800, and the government would pay the other £200. If you pay income tax at above the basic rate, you can claim even more tax relief through your tax return or by writing to HMRC.

Don’t be daunted by investment choices

When you save into a SIPP you will need to elect how your money is invested. There are literally thousands of choices you could make - but you can make things simple for yourself.

There are options that allow you to invest in a well-balanced portfolio of investments that will then be corrected for you as time goes on. Pathfinder is a range of Fidelity funds which are based on risk ratings. You pick a level of risk you feel happy with and the rest is done for you. Alternatively, the Select 50 Balanced Fund is one single fund which splits your money between several funds from our Select 50 list that have been hand-picked by our investment experts and managed to provide a smooth investment journey.

Keep an eye on your targets

Once you have a SIPP set up, with a regular contribution being made and investments chosen, you can focus on building your pot of money. Fidelity Personal Investing has a range of retirement calculators that allow you to work out how much you’ll need in retirement, and see how much ground you’re making up.

At first, it can seem like your target is a long way off but, once you know what you’ll need, you’ll be encouraged to increase your saving and accelerate your progress.

More on pensions

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. Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Latest insights

The ‘SG’ in ESG: why it matters

It’s not all about the environment


Daniel Lane

Daniel Lane

Fidelity Personal Investing

BoE’s Carney looks the odd man out

The Bank’s warning about rate rises looks hollow


Ed Monk

Ed Monk

Fidelity Personal Investing

Behave yourself

Tackling emotional investing is paramount


Daniel Lane

Daniel Lane

Fidelity Personal Investing