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Self-employed pensions

Don't get caught out when you retire. If you're self-employed, you might want to think about how you'll fund your retirement.

Self-employed pension options

According to a survey by the Office for National Statistics (ONS)  self-employed workers aged 35-54 are more than twice as likely to have no pension wealth than those who have an employer. This page looks at the different pension options open to you and compares them to owning property as your pension.

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The State Pension

To be eligible for the State Pension you'll need at least 10 qualifying years of National Insurance contributions or credits. The State Pension alone is unlikely to maintain the lifestyle you've enjoyed before retirement, however.

If you're self-employed, you will usually need to pay your National Insurance contributions through your self-assessment tax return. The Money Advice Service has more information on the type of contributions you will need to pay, and the benefits those contributions pay for.

Self-invested personal pension (SIPP)

You might also decide to use a SIPP, which allows you to decide how much you want to invest and when. In comparison to the State Pension, you will normally be able to make withdrawals from a SIPP when you reach age 55.

Also, the government (HMRC) will give you 20% tax relief on anything you pay in (up to a specific limit, and depending on your circumstances).

SIPPs give you the opportunity to invest in a range of investments, including mutual funds, shares, cash, exchange traded funds (ETFs) or investment trusts.

With all this choice, you may appreciate our guidance service to help you choose investments, whether you’ve invested before, or you’re just starting out.

If you're unsure about the suitability of a pension or an investment you should seek advice from an authorised financial adviser.

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Our SIPP

Our SIPP is a great way to start saving for retirement. Manage your investments 24/7 using our online service and choose from thousands of funds, shares*, exchange-traded funds (ETFs) or investment trusts to invest your pension in.

  • Start your SIPP today with a lump sum payment from as little as £800, a regular savings plan from as little as £40, or by transferring a pension in. Employers, your limited company, or someone else you know can also pay in.
  • Our low-cost service fee is just 0.35% (ongoing fund charges apply) - and you can get extra benefits when you invest more than £250,000, including a Relationship Manager and a reduced service fee.
  • Get instant access to our investment expertise, market insights and planning tools. And our freephone UK and Ireland call centres are open from Monday to Saturday. 
  • Gives you flexible income options when you want to access your money, including drawdown.

*Share dealing is available for your SIPP if you opened it on or after 27 March 2019 and you were 53 years old or younger at the time, or if you already have a SIPP with us and you received a letter saying that it has been moved to our new system.

This information is not a personal recommendation for any particular product, service or course of action. If you are in any doubt whether or not a pension is suitable for your circumstances you should speak to an authorised financial adviser. The value of investments can go down as well as up so you may not get back what you invest. Eligibility to invest in a SIPP or Junior SIPP depends on personal circumstances and all tax rules may change in the future. You cannot normally access money in a SIPP until age 55.

Open a SIPP

Ready to open a SIPP? First, please tell us who will be paying into it...

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I'm paying in

If you will be the primary person paying in to the SIPP, you can open an account online now.

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My employer is paying

If your employer will be the primary payer to the SIPP, you can open an account now using the form below.

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Someone else is paying

If a spouse, partner, friend or relative will be the primary payer to the SIPP, you can open an account now using the form below.

If you have any questions please call us on 0800 368 1722.

You can start investing once your account is open, but if you like you can and then open your account.

Self-employed pension FAQs

How much should self-employed workers contribute to their pension?
What tax relief can the self employed claim on a pension?
Are self-employed workers entitled to the State Pension?

My property is my pension

The differing attitudes to property wealth between the employed and self-employed goes some way to explaining the low pension rates among the self-employed.

According to the ONS wealth and assets survey1 42% of self-employed workers were found to view investing in property as the safest way to save for their retirement.

This belief is reflected in the relative property wealth for those self-employed when they reach retirementfor those aged 55 and above, the share of the self-employed owning net property wealth greater than £500,000 is 28.3% versus 12.7% of employees2.

1Early indicator estimates from the Wealth and Assets Survey: attitudes towards saving for retirement, automatic enrolment into workplace pensions and financial situation, July 2016 to December 2017, ONS, August 2018.
2Trends in self-employment in the UK, ONS, February 2018.

Young couple moving into a new house

Pension or property?

One of the attractions of property has been the seemingly unstoppable rise in house prices since the turn of the millennium.

In that time, UK house prices have outstripped the performance of the stock market. That fact, combined with property being a much more tangible investment than stocks, has led to a collective belief that house prices will continue to rise indefinitely.

Over the long term however, stocks have outperformed house prices over a 30 year period.

It's important to note that the past performance of both the property market and the stock market is not a reliable indicator of what might happen in the future.

Tax features of pensions and property

Pensions

  • Contributions to a pension are topped up by 20% by the government. If you pay tax at above the basic rate you may be able to claim further tax relief in your annual tax return*
  • Investments held within a pension don’t usually suffer income or capital gains tax (CGT) and don’t usually form part of your estate on death so are not subject to inheritance tax
  • You can normally take up to 25% of your savings as tax-free cash from age 55 onwards. Any further income is taxable at your marginal rate of income tax

Property

  • Stamp Duty on additional properties is calculated at 3% more than the rate you pay for your main residence
  • Capital Gains Tax is calculated at a higher rate on residential property than on other assets. However individuals do have an annual capital gains exemption they can use
  • Income from renting a property is usually taxable at your marginal rate of income tax
  • You can potentially reduce the tax you pay by deducting certain allowable expenses though mortgage interest tax relief is being restricted gradually starting from 6 April 2017

*Tax relief is only available on the lower of the annual allowance (currently £40,000) or 100% of your earnings in a given tax year. If you exceed your annual allowance you may have a tax charge to pay unless you have unused allowance you can carry forward. If you have earnings of £110,000 or more, the amount you can pay in and receive tax relief on could be ' tapered' down to £10,000. Alternatively, if you’ve already taken taxable income from your pension pot under pension freedoms, your annual allowance may be £4,000 (known as the money purchase annual allowance) and you will not be able to use carry forward to contribute to a SIPP.

For more information on tax relief and all the allowances please visit our pension allowances page.

Ed Monk visits a pop-up workspace for the self-employed

The way we work is changing - what impact might this have on your retirement savings?

In this video Ed Monk explores the world of the self-employed and explains why a pension might help you enjoy the same freedoms in retirement as in your working life.

Watch the video

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.