For many self-employed workers, the freedom of being your own boss can be reduced slightly with the financial instability it can bring. Without the structure of a fixed salary, holiday and sick pay and a workplace pension, the dream of early retirement can feel out of reach. However, it’s nowhere near impossible. With the right plans and careful discipline, retiring early is something any self-employed worker can aim for.
Whatever financial goal you have in mind - here are some things you can do to retire on your terms.
Set clear lifestyle and financial goals
Like with many things in life, retirement planning is a lot easier when you’re working towards a specific target. Early retirement means different things to different people. So think about at what age you’d like to stop working - but keep in mind the age at which you can access your pensions.
If you have a defined contribution pension, whether that’s an old workplace pension or a personal pension, you can start accessing the money from 55 (rising to 57 from 2028). Whereas if you’re eligible for the State Pension, you have to wait until you’re 66 (rising to 67 from 2028). If you’re not sure at what age you’re eligible to the State Pension from, you can check your State Pension age using PensionBee’s State Pension Age Calculator.
With your retirement age in mind, start mapping out what you want those years to look like. For example, would you want to travel the world, spend time with family or learn new skills? This helps you to work out how much money you’ll actually need. Need somewhere to start? The Pensions and Lifetime Savings Association (PLSA) have developed a set of Retirement Living Standards that can help you visualise retirement at three different income levels.
Once you have a rough annual figure, multiply it by the number of years you expect to spend in retirement. Make sure you factor in things like life expectancy, inflation and potential healthcare and caring costs.
Now you have your retirement goal, you can work backwards and break it down into monthly or yearly savings goals. PensionBee’s Pension Calculator can be a helpful tool at this stage in helping you to see how much you need to save and how long it’ll take you to get there. It’s a good idea to review this on a regular basis and adapt if your income or retirement goals change using the sliders.
Take advantage of tax relief
You may already be aware but it’s worth a reminder - pension contributions (up to a limit) are eligible for *tax relief. Think of this as a bonus for saving into a pension.
Most basic rate taxpayers usually get tax relief of 25% - which means a £100 contribution to your pension pot is topped up £25 by HMRC making it £125. If you’re a higher or additional rate taxpayer, you can claim further tax relief through a Self-Assessment tax return. PensionBee’s Tax Relief Calculator can help you work out how much tax relief you could get and whether you need to file a Self-Assessment.
If you’re the director of a limited company, you can make company contributions as well as personal contributions to your pension. Company contributions count as an allowable business expense (though they must be wholly and exclusively for business purposes). This could save you corporation tax. Depending on your company profits this will be up to either 19% or 25%.
You’ll also get National Insurance (NI) relief, as the contributions come from your pre-tax income. Just remember that there’s a limit - the standard annual allowance for pension contributions is £60,000 (2025/26). For personal pension contributions eligible for tax relief, this is further limited to 100% of your salary (whichever is lower).
Further guidance on pension contributions as a business expense can be found in HMRC’s Business Tax Manual.
Adapt your pension pot
As a self-employed worker, you might worry that you won’t always be able to make pension contributions. Without the structure of a fixed salary, there could be times when you want to reduce or pause your contributions.
However, there are flexible options available. For example, PensionBee’s self-employed pension allows you to adjust contributions as and when you need to.
In higher-earning months you can save more, while in slower months you can reduce contributions. If you really need to, it’s also possible to pause them for a while with no fee or penalty.
Think about where your pension is invested
Something you may not have thought about is where your pension gets invested. You’ll need to think about your risk tolerance as well as your age when looking at your investments. Some people like their pensions to be invested in higher risk funds while they’re a few decades away from retirement, with the risk level then being reduced as they get older. So it’s definitely worth looking at the fund you’re invested in and speaking to your pension provider if you aren’t sure. PensionBee customers can find their plan information by logging into the app or the website and looking at the ‘Account’ section of their BeeHive.
If you aren’t sure where to start, consider working with a financial adviser who specialises in working with self-employed workers. They can help you maximise your returns and avoid any pitfalls, and the right one can be worth the fee. You can find a qualified independent financial adviser (IFA) using the Financial Conduct Authority’s (FCA) register, Unbiased or MoneyHelper.
Build passive income streams
Passive income can be a game changer for early retirement. These are income sources that require little to no involvement once you’ve done the initial set up. An example could be investing in property that you can rent out, giving you a regular monthly income. Building these passive income streams and creating a portfolio career is becoming more popular. For those approaching retirement, the more diverse your income sources are, the less you’ll be relying on your pension savings alone.
Retiring early as a self-employed worker might sound like an ambitious goal - but it’s an achievable one. By having a structured plan, taking advantage of the benefits that come with saving into a pension, and diversifying your income streams - you can put yourself on a smoother path to financial freedom.
Nilesh Pandey is a Freelance Writer who’s been trusted by businesses and entrepreneurs across the globe. Over the last decade, he’s worked with companies in industries such as tech, private equity and pharmaceuticals, while seeing his words appear in national newspapers and international speeches. Nilesh is also a regular Writer for Your Business magazine.
*The value of tax relief(s) to any individual or limited company will depend on their financial circumstances. Contributions can be a complex area so if you’re not sure how making contributions will impact you or your business, seek advice from a qualified independent financial adviser (IFA).
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
