Half of self-employed DON'T save in a pension - so should you invest?
Recent 2025/2026 data from the Association of Independent Professionals and the Self-Employed (IPSE) highlights a persistent savings gap: only 48 per cent of self-employed workers are currently contributing to a pension each month. In contrast, over 80 per cent continue to prioritize accessible cash accounts, often missing out on the significant government 'top-ups' available through pension tax relief.
It means scores of people who work for themselves could be missing out on tax relief on their savings. That's because the Government adds a percentage onto anything you save. And they could even be paying tax twice on their investment.
If you're a basic rate taxpayer, the Government adds 20% to whatever amount you pay into your pension. So a £100 contribution becomes £125 in your pot.
Financial advisor Lucy Goodwyn, who shares tips to reduce your tax bill on Instagram and Facebook, told NimbleFins: "Being self-employed means it’s likely your income will fluctuate from year to year, and it can be a challenge to save on a regular basis. This can mean that many people do not see a pension as a priority.
"But a pension is the most tax-efficient vehicle available to UK savers because the Government typically adds relief to your contributions. This boost essentially increases the value of every pound you pay into a pension."
As a self-employed worker, putting money into a pension reduces the profits you make, which can be the difference between paying basic rate tax or higher rate. Depending on the circumstances, it could also potentially reduce your taxable income by:
- Helping you hold on to your personal allowance, which is slowly withdrawn once you earn more than £100,000.
- Bringing your income down below the additional-rate tax band, which starts at £125,140.
- Help you hold on to your Child Benefit, because under the current 2025/26 rules, the High Income Child Benefit Charge only begins to trigger once a parent's individual income exceeds £60,000. The benefit is then gradually withdrawn until income hits £80,000, at which point the charge equals the benefit amount. By making a pension contribution, you can lower your 'adjusted net income' to stay below these thresholds and retain more of your family's support.
Cash savings accounts can also leave investors paying tax twice - first in income tax and then on any interest made over the threshold.
NimbleFins previously reported how millions were expected to pay tax on their savings income after interest rates rose.
For those with a small, or no pension pot, Lucy Goodwyn still encourages investing.
She added: "It’s never too late.
"No two people have exactly the same income, savings, assets and family set-up, so pensions are a very personal thing. Not maximising pension contributions may seem like a good option given current cost pressures, but could have long-term implications and you’ll miss out on the tax benefits.
"How much you pay in now is a choice that could significantly impact your standard of living later in life, when you have fewer other options open to you.
"Given those longer-term consequences, it’s worth asking yourself if not prioritising your pension contributions is the best way to balance your short-term needs with your long-term plans."
Cons of saving into a pension
While there are many pros to saving into a private pension, one drawback is the lack of immediate access. Currently, the minimum age to withdraw your pension is 55, but with the 2028 deadline now just two years away, this is set to rise to 57.
If you are approaching your mid-fifties in 2026, it is vital to factor this imminent age increase into your retirement timeline, as you may have a narrower window to access your funds than previously planned.
Ms Goodwyn said: “A pension is a long-term investment vehicle.”
Other investment options for self-employed people
Ms Goodwyn suggests considering ISAs as well as pensions to make use of tax-free saving.
She said: "Using pensions and ISAs together can help you save for the future as well as reduce your tax liability, contributing to overall financial wellness.
The end of the tax year is an ideal time to take stock and ensure your money is working as hard as possible. This is particularly critical as we move into the 2026/27 tax year, which represents the final opportunity for many to utilize the full £20,000 Cash ISA allowance.
Following the recent Autumn Budget, a new £12,000 cap on Cash ISA contributions will be introduced in 2027, making it more important than ever for the self-employed to balance their portfolios between pensions and tax-efficient ISAs now.
"How much you pay into your pension depends on your earnings and the tax bracket you fall into, so it is best to get financial advice to plan for your lifestyle now, and in retirement."
NimbleFins provides general information about how pensions work, not individual advice. Please contact a qualified financial advisor to discuss your personal financial situation.
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