So, You’re a Freelancer… and You’ve Been Meaning to Sort Your Pension

Let’s be honest.

No one’s setting this up for you.
There’s no HR department enrolling you.
No employer contributions quietly building in the background.

It’s just you.

And if you’ve been putting this off for ages? You’re absolutely not alone. Most freelancers do.

The good news? Once you understand how pensions actually work, they’re far less intimidating and one of the most tax-efficient things you can do with your income.

Why Bother With a Pension at All?

A pension is simply a long-term investment account with generous tax relief.

In most cases:

• For every £80 you put in, the government adds £20.

• If you’re a higher earner, you can claim even more back through your tax return.

• If you run a limited company, employer contributions can reduce corporation tax and avoid dividend tax and National Insurance.

In other words, it’s one of the few areas where HMRC actively helps you build wealth.

How Contributions Work for You

How you contribute depends on how you’re set up.

If you’re self-employed (sole trader):
Contributions are made personally from your own bank account. You receive basic rate tax relief automatically, and if you’re a higher-rate taxpayer you reclaim the rest via your tax return.

If you run a limited company:
Contributions are usually paid directly from the company as an employer contribution. This is often more tax-efficient reducing corporation tax and avoiding dividend tax and National Insurance.

Same pension concept.
Very different tax treatment.

How Much Should You Be Aiming to Contribute?

There’s no perfect formula.

But here are some sensible guideposts based on what we typically see:

• In your 20s: The priority is just starting. Even 5–10% of income builds serious long-term momentum.

• In your 30s: Many freelancers aim for 10–15%.

• In your 40s: Contributions often increase to 15–25%, especially if catching up after years of reinvesting in the business.

These aren’t rules. They’re reference points.

What Other Freelancers Worry About

If any of these sound familiar, you’re in good company:

• “What if my income drops next year?”

• “Should I be investing in my business instead?”

• “My partner has a pension - does that matter?”

• “What if the rules change?”

• “What if I lock money away and regret it?”

Freelancers value flexibility, so build a pension plan that fits your income pattern.

There's No Such Thing as a Standard Household

Some freelancers are single.
Some are married.
Some are cohabiting.
Some households rely on one income.
Some partners have strong pensions; others paused careers for childcare.
Some expect an inheritance. Others are building everything themselves.

There is no cookie-cutter retirement model.

Your pension strategy should reflect your real life, not someone else’s template.

What Freelancers Are Actually Doing

Here’s what we’re seeing in practice:

• Opening simple, app-based pensions like PensionBee to get started quickly.

• Moving to a SIPP once income grows and they want more investment control.

• Reviewing profits annually and contributing what feels comfortable before year-end.

• Using strong years to boost contributions instead of extracting everything.

• Contributing to a spouse’s pension where one partner earns less.

• Checking beneficiary nominations to ensure pensions go to the right person.

A Few Helpful Things You Might Not Know

• You can contribute up to £60,000 per year (subject to earnings and allowances).

• You may be able to carry forward unused allowance from the previous three tax years.

• Even if your spouse or partner doesn’t earn, you can contribute up to £3,600 gross per year into a pension in their name and still receive tax relief.

• Investments inside a pension grow free from Capital Gains Tax and Income Tax.

• If you run a limited company, employer pension contributions are usually more tax-efficient than extra dividends.

• Under current rules, you can normally take 25% tax-free when accessing your pension.

• You can easily set up a monthly Direct Debit and treat your pension like paying a bill.