Guide 1 of 16 in Tax and Self-Assessment
Pension and Retirement: The Self-Employed Crisis
If you are self-employed in the beauty industry, there is a very high chance you are not saving for retirement. You are not alone in that, but the numbers should worry you.
Quick rule of thumb: If you put nothing aside for retirement, your only income from State Pension age will be roughly £230 per week. That is less than £12,000 a year. Even £50 a month into a pension now will make a real difference.
Tip for new starters: Open a pension the same week you register as self-employed. Even £25 a month gets you into the habit. The government adds 25% on top through tax relief, so your £25 becomes £31.25 for free.
The Problem
Only 14% of self-employed workers contribute to a pension (2025-26). That figure was 33% in 2005. It has more than halved.
The typical self-employed pension pot at retirement is around £50,700 (2025-26). The average employee retires with roughly £338,000. That means self-employed workers have about 15% of what employees have saved.
The gender pension gap makes this worse. At ages 55 to 59, the gap between men's and women's pension wealth is 48% (2025-26). In a sector where 86% of the workforce is female, that hits hard.
Nobody auto-enrols you. Nobody matches your contributions. Nobody reminds you. If you do not actively set up a pension and pay into it, nothing happens.
State Pension Basics
The State Pension is a flat-rate payment from the government once you reach State Pension age (currently 66, rising to 67 between 2026 and 2028).
Full new State Pension 2025-26: £230.25 per week (£11,973 per year). Full new State Pension 2026-27: £241.30 per week (£12,548 per year).
To get the full amount, you need 35 qualifying years of National Insurance contributions. To get anything at all, you need at least 10 qualifying years.
Good news for self-employed workers: from April 2024, if your profits are above £12,570 (the Small Profits Threshold), Class 2 NI is "deemed paid" automatically. You do not have to do anything extra. Your qualifying years stack up through your Self Assessment.
If your profits are below £12,570, you can still pay voluntary Class 2 NI (£3.50 per week in 2025-26) to protect your State Pension record.
Check your forecast at gov.uk - search "Check your State Pension." It takes two minutes and shows exactly how many qualifying years you have and what your State Pension will be.
Tip for new starters: If you had a PAYE job before going self-employed, those years count too. Your State Pension forecast will show your full record, including employment years.
Personal Pension Options
A personal pension (also called a private pension or self-invested personal pension) is a pot you build yourself. You choose the provider, you choose how much to pay in, and you choose where to invest it.
You cannot normally access your pension until age 55 (rising to 57 from April 2028).
Tax Relief: How It Works
This is the best bit. When you put money into a pension, the government tops it up.
- You pay in £800. Tax relief adds £200. Your pension gets £1,000. That is basic rate (20%) relief, applied automatically by your provider.
- If you are a higher-rate taxpayer (40%), you can claim another £200 back through your Self Assessment return. So your £1,000 pension contribution really only cost you £600.
The Lifetime Allowance (the cap on total pension savings) was abolished in April 2024. There is no longer a penalty for having a large pension pot.
The Annual Allowance is £60,000 (2025-26). That is the most you can contribute in a single tax year and still get tax relief. Very few self-employed beauty workers will hit this limit.
Provider Comparison
| Provider | Annual Fee | Minimum Contribution | Notes |
|---|---|---|---|
| NEST | 1.8% contribution charge + 0.3% AMC | £10 per contribution | Government-backed. Simple. Higher contribution charge than others. |
| PensionBee | 0.50% - 0.95% | No minimum | App-based. Good for consolidating old pots. Fee depends on plan. |
| Vanguard | ~0.15% platform + low fund charges | £500 lump sum or £100/month | Cheapest for larger pots. Limited fund range. |
| Moneybox | 0.45% (up to £100k) | No minimum | App-based. Also does ISAs. Round-up feature. |
NEST is the simplest starting point. Vanguard is the cheapest long-term option if you can meet the minimums.
How Much to Save
Here is a rough example:
£50 per month for 20 years at 5% average growth = approximately £20,000 to £21,000 (2025-26 projection).
That is not life-changing, but it is £20,000 more than nothing. And with tax relief, your £50 per month only actually costs you £40 out of pocket (basic rate).
A common rule of thumb: halve the age you start saving and use that as the percentage of your income to save. Start at 30, save 15%. Start at 20, save 10%. These are targets, not minimums. Anything is better than nothing.
Pension vs ISA
Both are tax-efficient savings options. Here is the difference:
| Pension | ISA | |
|---|---|---|
| Tax relief on the way in | Yes (20% or 40%) | No |
| Tax on the way out | 25% tax-free, rest taxed as income | All tax-free |
| Access | From age 55 (57 from 2028) | Anytime |
| Annual limit | £60,000 | £20,000 |
If you will not touch the money before 55, a pension wins because of the upfront tax relief. If you might need the money sooner, an ISA gives you flexibility.
Most people benefit from having both. The pension for retirement, the ISA as a safety net you can dip into.
What to Do Next
- Check your State Pension forecast at gov.uk. Do this today.
- Open a pension account. NEST or PensionBee if you want simple. Vanguard if you want cheap.
- Set up a direct debit for whatever you can afford. Even £25 per month.
- Tell your accountant (if you have one) so they can claim higher-rate tax relief on your Self Assessment.
- Set a calendar reminder to review your pension once a year.
Who to Contact
- MoneyHelper - 0800 138 7777 (Free). Impartial guidance on pensions, savings, and debt.
- Pension Wise - 0800 138 3944 (Free). One-to-one guidance if you are 50 or over. Book through MoneyHelper.
- NEST - 0300 020 0090 (Paid). Government-backed pension provider.
- HMRC - 0300 200 3300 (Paid). For National Insurance record queries.
- State Pension forecast - gov.uk/check-state-pension (Free).
Sources
- ONS, Self-employed pension participation, 2024
- DWP, State Pension rates 2025-26 and 2026-27
- HMRC, Annual Allowance and tax relief guidance, 2024
- NEST, PensionBee, Vanguard, Moneybox - provider fee schedules (accessed 2025-26)
- MoneyHelper, Pension guidance for self-employed, 2024
Related Guides
- Tax-Saving Strategies
- National Insurance for Self-Employed
- Cash Flow Management
- Maternity Allowance for Self-Employed
- Closing or Pausing Your Business
- Setting Up Record-Keeping
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Key Contacts
MoneyHelper
0800 138 7777 . Impartial guidance on pensions, savings, and debt.Free
Pension Wise
0800 138 3944 . One-to-one guidance if you are 50 or over. Book through MoneyHelper.Free
NEST
0300 020 0090 . Government-backed pension provider.Paid
HMRC
0300 200 3300 . For National Insurance record queries.Paid
State Pension forecast
gov.uk/check-state-pension .Free