As contractors, your pension arrangements may differ from the norm — whether you have a defined benefit scheme, a workplace pension, or need to set up your own SIPP. This guide covers everything you need to know.
- Check your State Pension forecast — filling NI gaps is often exceptional value
- Check ongoing charges — old pensions drift expensive
- Tax relief turns £80 into £100 (£60 for higher-rate payers) — use it
- Capture the full employer match before any other saving — free money first
Insider Notes
The quietest number on your statement is the most important: a 1% fee gap can consume a quarter of a lifetime pot. Check the ongoing charge on every pot; switching platforms is easier than it looks.
The State Pension forecast is a to-do list, not just a statement: gaps from caring, low-income years or time abroad can often be filled — a voluntary Class 3 year costs ~£800 and can add £300+/year for life. Ten minutes on GOV.UK now can be worth thousands in retirement.
Pension Options for Contractors
| Provider | Annual Fee | Type | Rating |
|---|---|---|---|
| Hargreaves Lansdown | 0.45% p.a. | SIPP | 5★ |
| AJ Bell | 0.25% p.a. | SIPP / LISA | 5★ |
| PensionBee | 0.50–0.75% p.a. | Combine pensions | 4★ |
| Aviva | 0.40% p.a. | Workplace / SIPP | 4★ |
| Vanguard | 0.15% p.a. | Low-cost index | 5★ |
Understanding Your Pension as Contractors
- Workplace pension — auto-enrolled by your employer, minimum 8% total contribution
- SIPP — self-invested personal pension, control your own investments
- NHS / Public sector pensions — defined benefit, exceptionally valuable
- State pension — £221.20/week (2026/27) after 35 qualifying NI years
- Additional voluntary contributions (AVCs) — top up your workplace scheme
How Much Should Contractors Save?
A common rule of thumb: save half your age as a percentage of salary. So if you start at 30, save 15% of salary. The earlier you start, the more compound interest works in your favour.
Pension Calculator
Use our free pension calculator to see what your retirement pot could look like based on your current contributions and expected retirement age.
Frequently Asked Questions
How much should I pay into a pension?
A rough rule: take the age you begin saving, divide by two — that's your target % of salary, including employer contributions. The 8% auto-enrolment minimum is a floor, not a plan.
When can I access my pension?
Currently from age 55, moving to 57 from April 2028. The first 25% is tax-free; drawing the rest slowly keeps you in lower tax bands.
Is the State Pension enough to live on?
For most people, no — it covers roughly a minimum standard only. Check your forecast on GOV.UK; buying missing NI years is often the best-returning purchase available.
Should I consolidate old pensions?
Often yes — fewer pots means lower fees and easier tracking. Beware exit fees and final-salary schemes, which you should almost never transfer out of.
What is pension tax relief actually worth?
Every £80 you contribute becomes £100 in the pot at basic rate. Higher-rate taxpayers effectively pay just £60 for £100 of pension — free money most people under-use.
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