How to plan for retirement as a small business owner

1st April 2026 by James Etheridge

Research suggests that many small business owners and self-employed workers aren’t prioritising their retirement and could face uncertainty later in life as a result. However, opening a pension could benefit both you and your business.

According to an article from Which? (1 March 2026), people who have spent most of their working life as self-employed are three times more likely not to have a private pension.

Fluctuating earnings and a reliance on your business could mean you overlook a pension

There are many reasons why small business owners are less likely to pay into a pension.

A key one is that your earnings might fluctuate, which may make it difficult to balance your short- and long-term financial priorities. Indeed, according to Which?, 4 in 10 self-employed workers cite this as their biggest barrier to retirement saving.

Working with a financial planner to create a tailored plan could help you understand how to manage retirement contributions.

Another reason small business owners might overlook a pension is the belief that their business will provide an alternative.

Whether you plan to sell your business or continue working later in life, having an alternative way to create income could be valuable, as it’s impossible to know what’s around the corner. For example, you might struggle to find a buyer who is willing to pay the price you want, or you may decide to retire earlier than expected due to ill health.

Without a pension to fall back on, you could face difficulties if things don’t follow your plan.

Working with a financial planner to create a cashflow model could help you assess your options. A cashflow model can help you visualise how your wealth might change depending on the decisions you make.

For example, you might use it to calculate how much you’d need to sell your business for to provide “enough” in retirement, or how much to contribute to a pension to provide a base income.

The outcomes of a cashflow model cannot be guaranteed. However, it could provide useful insight when you’re making long-term decisions, such as whether to contribute to a pension.

3 practical reasons small business owners could benefit from a pension

While most employed workers are now automatically enrolled into a pension, as a small business owner or self-employed worker, it is your responsibility to open a pension. Here are three practical reasons to do so.

1. A separate pension pot could offer peace of mind

While you may hope to use your business to fund your later years, a separate pension pot could act as a safety net in case something unexpected happens.

Separating some of your finances from those of your business could help keep your retirement on track. However, you should note that you cannot usually access your pension savings until you turn 55 (rising to 57 in 2028). As a result, you might want to consider your pension contributions in a wider context, such as other savings and investments that could help you meet short- and medium-term goals or expenses.

2. A pension is a tax-efficient way to save for your retirement

If you’re saving for retirement, a pension is often a tax-efficient way to do so.

First, your contributions will usually benefit from tax relief, which means some of the tax you’ve paid is added to your pot, providing an immediate boost to your retirement savings and reducing your tax liability.

Tax relief is paid at your rate of Income Tax. Typically, basic-rate tax relief will be added to your pension by your pension provider automatically. If you’re a higher- or additional-rate taxpayer, you can claim your full entitlement through a Self Assessment form.

Second, returns made from investments held in your pension will not be liable for Capital Gains Tax, which may not be the case for investments that aren’t in a tax-efficient wrapper.

3. Pension contributions may be an allowable business expense

Paying into your pension could be tax-efficient from a business perspective. In some cases, contributions are treated as an allowable business expense, which could reduce taxable profit and the business’s overall tax bill.

Contact us to talk about your retirement

If you’d like to create a retirement plan as a small business owner, please get in touch. We could help you assess your options, including opening a pension, and create a plan that’s tailored to your needs and goals.

Please note: This article is for general information only and does not constitute advice. The information is intended only for individuals.

All information is correct at the time of writing and is subject to change in the future.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate cashflow modelling.