If you’re self-employed, saving for retirement is a key consideration.
You don’t get employer pension contributions and there’s no automatic enrolment. It’s entirely your responsibility. This makes choosing the right pension even more important.
A Self-Invested Personal Pension (SIPP) is one option worth considering. It offers flexibility, control, and tax benefits that can help you build long-term wealth.
Here’s how it works, and what to think about before getting started.
A pension matters more if you’re self-employed
When you’re employed, your workplace pension does a lot of the heavy lifting. Contributions are automatic, your employer adds money on top and you benefit from tax relief as standard.
If you’re self-employed, none of this happens unless you set it up yourself.
That means you have to decide how much you want to contribute and how often. It also means you may need to choose your own investments. From there, your retirement pot depends almost entirely only on your consistency.
What is a SIPP?
A SIPP is a personal pension that lets you choose and manage your own investments.
Like other pensions, it offers tax relief on contributions. But it also gives you more control over how your money is invested.
For self-employed people, it offers both flexibility and control. It’s also a great way to get better visibility on how you’re doing. Pensions can feel opaque, but a good SIPP can be treated the same as any other investment account, just with different aims.
Key features
- A SIPP is a tax-efficient way to save for retirement
- They offer a wide range of investment options
- You have the ability to contribute flexibly
- You can transfer in other pensions you may have
How SIPP tax relief works
One of the main benefits of a SIPP is tax relief.
Basic-rate taxpayers get 20% added automatically. Higher and additional-rate taxpayers can claim more through their tax return.
Find out more about SIPP and tax relief.
Contribution limits
Each tax year, you can invest up to £60,000 per tax year into a SIPP, or 100% of your earnings (whichever is lower). You can also carry forward any unused SIPP allowance from the previous three tax years.
For a lot of people, maximising this allowance each year won’t be possible. So, for most, it’s about using as much as possible to benefit from the generous tax benefits afforded to SIPPs.
As ever, tax treatment depends on your individual circumstances and may change.
How much should you contribute?
There’s no fixed rule about how much you should put into your pension every month. The thing that makes the most difference is consistency. Most self-employed people will pick a number that works for them based on their income and stick to that.
When you’re self-employed, however, income can vary. That means your pension contributions may need to be flexible too. This is where a SIPP can really help. You can amend your contributions and keep track of your investments on the go.
You might consider:
- Contributing a percentage of your income
- Making larger contributions in higher-earning years
- Setting up regular payments to stay consistent
Even small, regular contributions can add up over time. When that timeframe is extended out over decades, as it usually is with a pension, the figures you can find yourself with for retirement can be substantial.
What can you invest in?
With a SIPP, you can choose how your pension is invested. A diversified portfolio can help spread risk and support long-term growth.
Want to know what other people have been putting into their pensions? Follow the link below to see the top ETFs for SIPPs on the InvestEngine platform over the last year. It only takes a few clicks to build a portfolio with InvestEngine, so you can be up and running with a portfolio of ETFs in minutes.
What about fees?
Fees matter a lot, especially over the long term. When comparing SIPP providers, look at:
- Platform fees. This is likely to make the most difference over the long run. InvestEngine SIPPs are free from platform fees, so you keep more of what you make.
- Investment costs. This is the cost of the investments themselves. ETF costs are small, but do apply even on InvestEngine’s otherwise fee-free SIPPs.
- Trading fees. If you plan on making regular adjustments to your SIPP or plan to make regular top ups, trading fees can add up. Again, InvestEngine doesn’t charge these.
- Withdrawal fees. Some platforms will charge you at the point of accessing your pension. It’s worth doing your research before choosing where to put your pension.
Lower fees can make a meaningful difference to your retirement pot over time.
Can you combine a SIPP with other pensions?
The short answer is yes.
If you’ve previously been employed, you may already have pensions you can transfer.
Bringing pensions together in one place can make them easier to manage, but it’s important to check for exit fees and any potential loss of guarantees or benefits. To find any pensions you might have elsewhere, you can use the government’s pension tracing service.
When can you access your SIPP?
You can usually access your pension from age 55 (rising to 57 in April 2028).
At that point, you have a few options:
- Take up to 25% tax-free
- Leave the rest invested
- Draw income as needed
Each option will work for different people at different stages. This flexibility is one of the key benefits of a SIPP.
In summary
If you’re self-employed, a SIPP can be a flexible and tax-efficient way to build your retirement savings.
It puts you in control, but that also means taking responsibility for contributing regularly and investing wisely.
By starting early and staying consistent, you give your investments more time to grow.
Important information
Capital at risk. The value of your investments can go down as well as up, and you may get back less than you put in.
Tax treatment depends on individual circumstances and is subject to change. ETF costs also apply.
This content is for information only and is not financial advice. If in doubt you may wish to consult a professional adviser for guidance.