If you’re a traditional employee, your pension contributions are set up automatically. You are typically enrolled into a workplace pension, and your employer also contributes a fixed percentage.
But if you’re self-employed, nothing happens automatically, and you will need to arrange your own pension – and that’s often easier said than done.
You won’t receive any reminders to start saving, and there are no employer top-ups. And if your income varies from month to month (as it does for most of us), it may seem impossible to put any money away for your retirement.
But the reality is, if you’re planning to stop working at some point – or reduce your hours later in life – you’ll need something to live on. The State Pension alone won’t be enough for most people, and the longer you leave it, the harder it is to catch up.
The full new State Pension is £241.30 a week in 2026/27 – around £12,548 a year. How much extra you need to save depends on the lifestyle you want, when you plan to retire, whether you have other assets and how long your retirement savings need to last.
What the State Pension gives you
For 2026/27, the full new State Pension is £241.30 per week — around £12,548 per year.
If your National Insurance record started after April 2016, you will normally need 35 qualifying years to receive the full new State Pension. Different rules can apply if you built up National Insurance contributions before then.
It provides a basic income and is unlikely to cover all your financial needs. It can help with essentials, but it won’t stretch far, particularly if you rent or still have regular outgoings in retirement.
You can also check your State Pension forecast on GOV.UK to see how much you may receive and when you can claim it.
What does retirement actually cost?
The Pensions and Lifetime Savings Association’s Retirement Living Standards provide a useful guide to how much different retirement lifestyles may cost. The figures are updated regularly as prices and spending patterns change.
The latest standards give the following annual spending targets:
| Standard | Single person | Couple | Example lifestyle |
|---|---|---|---|
| Minimum | £13,900 | £22,500 | Basic needs covered, with some money for leisure and social activities |
| Moderate | £32,700 | £45,400 | More financial security and flexibility, including holidays and meals out |
| Comfortable | £45,400 | £62,700 | Greater flexibility, more frequent holidays and more spending on luxuries |
These figures are annual spending targets, rather than amounts that already have the State Pension deducted.
So, if you wanted £32,700 a year and expected to receive the full State Pension of around £12,548, you would need to find the remaining income from private pensions, savings, investments or other sources.
The standards also generally assume that you do not have rent or mortgage payments to make in retirement, so your own target may need to be higher if you expect to have housing costs.
What is a realistic pension saving goal?
A pension pot of around £300,000 is sometimes used as a useful illustrative target when planning for retirement.
It’s not a magic number, though. The amount you need depends on your desired lifestyle, retirement age, other savings and investments, housing costs, and how long you expect your money to last.
Of course, how you get there depends heavily on when you start and how your investments perform. Time makes a big difference.
For some useful background on how pensions work, read our guide to pensions for sole traders.
How much do you need to save each month?
The amount you need to save depends on how early you start and your target pension pot size.
It goes without saying: the earlier you start, the easier the burden will be when you’re older, but when you’re in your 20s, thinking about retirement is often the last thing on your mind!
This table shows how much you’d need to save each month to reach different pension pot targets by age 67, assuming a 5% annual investment return and no existing savings.
| Start age | Years to retirement | To reach £200,000 | To reach £300,000 | To reach £500,000 |
|---|---|---|---|---|
| 25 | 42 | £117 | £175 | £292 |
| 35 | 32 | £212 | £318 | £530 |
| 45 | 22 | £417 | £626 | £1,043 |
| 55 | 12 | £1,016 | £1,525 | £2,542 |
Figures calculated using the future value of an annuity formula with monthly compounding at a 5% annual growth rate. They assume no investment charges and do not adjust the target pension pots for inflation.
Inflation matters here. £300,000 in several decades’ time will not have the same purchasing power as £300,000 today, so these figures are useful illustrations rather than precise savings targets.
What £300,000 might give you in retirement
With a pension pot of £300,000, some people use the 4% rule as a rough planning guide, taking around £12,000 in the first year of retirement.
The 4% rule was developed using historical US investment data and is not a guarantee that a pension will last for a particular period. The appropriate withdrawal rate depends on investment returns, inflation, charges, how long you live, and whether you adjust your spending over time.
A £12,000 annual withdrawal, combined with the full 2026/27 State Pension of around £12,548, would provide total income of about £24,548 a year before tax.
That’s not extravagant, but it may be sufficient for a modest yet stable retirement, particularly if your home is paid off and your living expenses are lower.
If you want to live closer to the Retirement Living Standards’ “moderate” or “comfortable” levels, you may need to aim higher or supplement your pension with other income sources such as property, savings, or ISAs.
You can also compare pensions and ISAs for the self-employed if you want some savings to remain accessible before retirement.
Tax relief makes pensions more efficient
One advantage of pension saving in the UK is the tax relief available.
If you’re a basic-rate taxpayer and contribute £80 to a pension using relief at source, the pension provider normally claims £20 from HMRC, so £100 goes into your pension.
If you’re a higher-rate taxpayer, you may be able to claim additional tax relief on contributions where some of your income has been taxed at the higher rate, usually through Self Assessment or directly from HMRC.
For self-employed people, pension contributions can therefore reduce the overall Income Tax cost of saving for retirement.
If you’re trading through a limited company, the company can make employer contributions directly to your pension. These work differently from personal contributions and may be particularly tax-efficient for company directors.
Read more in this popular guide: How pensions work for sole traders
What if your income isn’t consistent?
For many sole traders and freelancers, income doesn’t arrive in neat monthly chunks. Some months are strong, others are quiet, so committing to the same pension payment every month isn’t always realistic.
That’s not a problem with most modern pensions. Contributions can usually be increased, reduced or paused, which makes it easier to save more when cash flow is good and ease off when it isn’t.
There’s also no rule saying pension saving has to be monthly. Some people prefer to make occasional lump-sum contributions after a particularly good trading period.
The bigger risk is simply leaving it too long. The later you start saving for your pension, the harder it becomes to build the same pot.
For more, read this guide: Not too late to start a pension if you’re self-employed
Check your progress with a calculator
If you’re not sure where you stand, it’s worth trying one of the free online tools that estimate your projected retirement income:
- MoneyHelper pension calculator – from the government-backed MoneyHelper service- a very useful tool.
- Which? retirement planner – good for checking gaps and setting goals.
- Saving Tool UK Pension Contributions Calculator – estimate how much you may need to contribute for retirement.
Introducing the ii SIPP
- ByteStart has partnered with Interactive Investor, a Which? Recommended Self Invested Pension Provider (SIPP) provider.
- With the ii SIPP, you pay a simple flat fee, not a percentage fee.
- You can also use the ii SIPP to combine any other pensions you may have and manage everything in one place via their website or user-friendly app.
- You can find out more here.
We recommend you talk to a pension specialist who can provide personalised advice tailored to your specific circumstances and needs. The information on our site should not be used as a substitute for professional advice.