Retirement for the self-employed: Top tips and advice

PUBLISHED: 10:45 24 November 2016 | UPDATED: 10:45 24 November 2016


As a professional adviser, I advocate the building up of value within savings for the future. This is important for everyone but I have a particular concern for the self-employed

Whilst in control of their respective careers, matters can be sadly lacking in relation to retirement provision. Employees traditionally have had the potential benefit/defined contribution pension scheme, or in more recent years the opportunity to take part in auto-enrolment, where the self-employed have no such benefit. Instead they must make their own provision, which can create difficulties in relation to cash flow and prioritising for that eventual retirement day - all whilst continuing to run a successful business.

With the erosion in people’s confidence in pension arrangements stemming from recent issues such as the funding of the BHS pension scheme, coupled with the public’s general suspicion of how these investments work, pension contributions are not seen as a priority. It is only with the advent of auto-enrolment that a consistent process is now in place to ensure that the employed save towards their retirement. Unfortunately, unless business owners are incorporated then the same process is not available for the self-employed, thus leaving them in a more vulnerable position.

It is important to think about pensions right from the start of a business enterprise or when first choosing self-employment. The state pension entitlement is worsening in relation to the benefits available and the age at which these can be drawn. Successive Governments have recognised that a reasonable standard of living cannot be delivered through this route and have continually looked to reduce future state commitments in favour of the private sector. This is set to continue with the eventual ‘means testing’ of state pension entitlement as a possibility.

This therefore leaves individuals, and especially the self-employed, with their own responsibility for delivering income at retirement. It is not ‘rocket science’ but the earlier one starts saving for retirement and the greater the level of contributions paid, then the overall value at retirement will be higher. As a “rule of thumb” and depending on growth etc., an individual who decides to delay making contributions to a pension plan for five years will need to double their contributions when they do start, to achieve the same level of pension fund value at retirement age. If we then add in that the self-employed tend to be involved in more manual occupations, then the requirement to receive monies earlier rather than later due to the loss of, for example, physical strength, is even more important.

The self-employed should save towards retirement through using a combination of regular contributions that works with an individual’s cash flow, together with lump sum contributions at the end of the accounting year. Not only will this provide tax relief for the individual with a steady stream of investment but it will also maximise contributions if profits allow.

As always, professional advice is a must and the self-employed should work closely with an independent financial adviser to plan for a specific date when benefits are required.

For advice and further information about retirement for the self-employed, please contact Tim Maakestad, Partner at Kreston Reeves and Director of Kreston Reeves Financial Planning, by phoning +44 (0)1293 776152 or emailing

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