It’s simple, all the healthy food we’re consuming and the hours of exercise we’re doing is making us live longer. According to the Office of National Statistics, the life expectancy for a man in the UK is 79.2 years, and for a woman, it’s 82.9 years.

Retired couple, looking over the sea.

Whether you choose to spend your later years cruising around the world or hiking up mountains, it’s never too early to start saving for your twilight years. Here are the pension options that are available to you as a self-employed contractor:

State pension

By 2020 the age at which both men and women can claim the State Pension will increase to 66. And, between 2026 – 2028 this will have increased to 67.

If you were to retire during the 2019/20 tax year and you qualify to receive the full State Pension, under the new single tier system, you could expect to receive £168.60 per week, or £8,767.20 per annum.

The question you’ve got to ask yourself is; Will this be enough to support me through my retirement? If the answer is no, you should consider supplementing your State Pension with a personal pension.  

Personal pensions

Personal pensions are deemed as ‘defined contribution’ pensions.’ This means the amount you’ll receive when you retire, depends on the amount you’ve invested and how well these investments have done. They’re relatively easy to set up – you decide how much you wish to invest, and the pension provider claims tax relief on these payments and adds it to your pot of money.

Shockingly though, research by The Pensions Advisory Service shows that only around a 1/3 of self-employed people are paying into a personal pension scheme. This is despite the fact that generous tax relief is afforded to pension contributions. And, as a director of a limited company any employer contributions you make into a pension scheme can be deducted from your profits as they’re deemed as an ‘allowable business expense’.  

Now that we’ve convinced you of the benefits of a personal pension, which scheme should you choose?  


A self-invested personal pension allows you to choose which investments you put your money into, such as bonds, shares, investment trusts and even precious metals like gold.   

SIPP’s can easily be managed through online portals and are perfect for individuals who want to take a hands-on approach to the management of their pension and who have some experience of managing investments.  

Stakeholder pension

Stakeholder pensions have been around since 2001 and are meant to offer individuals an alternative to costly and risky investments. The government has set a minimum number of standards which each scheme must meet, including capping charges at 1.5% per year for the first 10 years.

Another draw of a stakeholder pension is their flexibility. Others can pay into it and you can transfer the funds held into another scheme. But they offer less investments choices and the funds tend to be low to medium risk, meaning the returns are less than what is offered  by other pension schemes.


NEST or National Employment Savings Trust was set up by the government to give employers access to an easy to use auto-enrolment scheme. NEST is primarily for individuals who are employed, but self-employed people can also join.

One of the draws of NEST was that it had relatively low charges, but as time has gone on other pension providers with better investment options have lowered their charges, which has made NEST less appealing.

We understand it’s not a straight-forward decision choosing what type of pension is right for you. Before making any decisions, you should talk to an FCA registered Financial Advisor. Our directors will be happy to recommend one who has experience working with self-employed contractors. Give us a call on 01962 867550 or get in touch via our website.