Retirement savings. Elderly man with money. Old male character wearing in casual clothes standing with jar of coins. Senior man with moneybox. Vector line art illustration.
Not sure how you will fund your future? This guide will help (Picture: Getty Images/iStockphoto)

Almost five million people in the UK are self-employed, a number that has surged by almost 50% in the past 20 years.

However, only one-third are saving into a pension, according to figures from the self-employed industry group IPSE.

This is causing concern the UK is facing a spike in pensioner poverty as more self-employed and freelance workers reach the state pension age.

If you’re self-employed and wondering how you’ll fund your retirement, read on, as we outline your options below…

What are the benefits?

Paying into a pension should be high on your priority list. This is because of generous tax relief from the government that boosts your contributions by 25% – while if you’re a higher rate taxpayer, you can claim further tax relief.

When it comes to choosing a pension, there are a few choices: a personal pension, a self-invested personal pension (SIPP) and a Lifetime Isa (Lisa).

Personal pension

A personal pension may also be called a stakeholder pension, and is offered by most providers and large investment firms. You can choose where you want your money invested from a list of funds provided by the company.

Fees and investment choices vary among providers. Examples of providers include Scottish Widows, Fidelity and Aviva.

Within a personal pension, you can select a ready-made portfolio where an investment portfolio is created on your behalf.

Ready-made options are offered by both traditional providers and newer digital investment companies where you can see how your portfolio is performing through an app. Examples of these include Nutmeg, PensionBee and Moneybox.
Another option is the government-backed Nest scheme. It allows contributions
from £10.

Pension vs Lifetime Isas



  • The government will provide tax relief of 20% to 45%, depending on your income tax band.
  • You can invest in a wide range of products through a pension – such as investment funds, individual shares and commercial property.
  • Can be opened at any age, and you can make contributions even after retiring.
  • Pensions are not usually liable for inheritance tax.


  • You can’t access your pension pot until 55 (rising to 57 by 2028).
  • You may pay tax when you withdraw an income from your pension in retirement (this depends on your income tax rate).
  • The annual contribution limit is £40,000. After this, you lose the tax relief.

Lifetime Isas


  • The government will boost your contributions by 25%.
  • You won’t pay any tax when you withdraw money from the Lisa.
  • Easy to set up and offered by a wide range of providers.
  • You can choose where you want your money invested.


  • Tax relief is capped at 25%. If you’re a higher-rate taxpayer, you can get more tax relief through a pension.
  • You can only withdraw money from the age of 60 (unless using it to buy your first home or you are diagnosed with a terminal illness). If you withdraw before then, you’ll face a 25% penalty.
  • You must be aged 18-39 to open a Lisa.
  • You can only pay in until the age of 50.
  • The £4,000 annual limit counts towards your overall annual Isa limit.
  • May be subject to inheritance tax.

Self-invested personal pension (SIPP)

With a self-invested personal pension (SIPP), you have the choice of a wider range of investments.

These can range from investment funds and company shares to currencies and commodities such as gold. You can even invest in commercial property through a SIPP.

They are offered through specialist providers, or through online investment companies such as Hargreaves Lansdown, Fidelity or Vanguard. You can also select a ready-made portfolio through a SIPP.

Lifetime Isa (Lisa)

A Lifetime Isa (Lisa) combines the best features of both pensions and Isas. You can use a Lisa to fund retirement or your first home.

For every £1 you pay in, the government boosts this by 25 per cent. This takes the total to £1.25, just like with a pension. You can pay in a maximum of £4,000 a year. With the government top-up, this takes the total to £5,000.

If you are using the Lisa for retirement, your money will likely be invested in the stock market, so the value will fluctuate, but will hopefully grow over time.
You must be under 40 to open a Lisa, but you can pay into it until you’re 50.

Money can be withdrawn from the age of 60. Like other Isa products here, the returns and income withdrawals are tax-free.


There are a number of other ways to fund retirement, without paying into a pension or Lisa.

Some people invest in property. This often involves buying properties to let out to tenants. The money received through rent can then give you an income.


Some business owners say they prefer to invest in their business. As they approach retirement, the aim is to sell up and live off the proceeds.


If you already pay into a pension and want another account for long-term savings, then a stocks and shares Isa could be a good option. You won’t get tax relief, but returns and withdrawals are tax-free. The account can be accessed at any time.


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